December 2019 - January 2020 No 242
www.executive-magazine.com
ECONOMIC
Lebanon: LL 20,000
ROADMAP
- DRAFT 3.0 -
12
executive-magazine.com
Executive 2019-2020
EDITORIAL
#242
No more lies
It’s only during crisis that truth comes to light. As everyone scrambles into new positions, reality is revealed. Each time the Lebanese equation changes, players let their
masks slip in their bid to defend their slice of what remains. The violations that are
perpetrated in the process are often so flagrant that forgiveness seems impossible.
Now is the time to face the truth—to be honest with ourselves and others—or instead of witnessing the rebirth of Lebanon we will all bear witness to its slow death. It
is past obvious that our political class is driven by ego, arrogance, incompetence, ignorance, and corruption—all while hiding behind geopolitical excuses that no longer, and
never did, make any sense. Even now, as I write this editorial, our politicians continue
to bicker among themselves over how to reform a government of old faces, while our
people recover from another night of violence inflicted upon them. But Lebanon has
changed, even if those who cling to power refuse to accept this new reality.
The picture we face now may be bleak, but we should never forget that we are a
rich nation, through our people, our heritage, and our nature—and it doesn’t take much
to put it all to good use. The pillars of our nation—our entrepreneurial private sector,
educated population, and wonderful culture—need strong institutions that allow them
to thrive. To achieve our promise we need leadership empowered by the people, not
dictated by foreign powers. We need leaders that understand the importance of, and are
able to launch and activate, the bedrocks of our economy—our agriculture, manufacturing, and services industries. Who understand the principles of competitiveness powered
by education, knowledge, and healthcare.
This Lebanon is within our reach. Executive’s Economic Roadmap 3.0 was drafted
amid the revolution with a renewed nation in mind. Regardless of who leads the transition, they will have this roadmap as a guide as they embark on the long road toward
Lebanon’s rebirth.
As Lebanese we need to stand up and reclaim sovereignty over our nation. Over the
course of this still ongoing uprising, we have seen the masks slip from our political
elite—accusations have become incriminations—and it is no longer possible to trust
those that have failed in power for 30 years. Instead, we put our trust in the people of
Lebanon. We put our trust in the collective will and spirit of the Lebanese, and our optimism in the hands of those who are battling every day for change, those who reimagine
Lebanon with their blood, tears, and hopes.
Now is the time.
Yasser Akkaoui
Editor-in-chief
1
Executive 2019-2020
CONTENTS
TO BREAK THE RULES,
YOU MUST FIRST MASTER
THEM.
2
executive-magazine.com
3
+41 21 642 32 66 | AUDEMARSPIGUET.COM | PHOTOGRAPHIÉ EN INFRAROUGE
Executive 2019-2020
CONTENTS
#242
EXECUTIVE
ECONOMIC ROADMAP
- DRAFT 3.0 -
Build & Reform
Strategize
Combat
Develop
Executive’s Economic Roadmap starts after page 56
LAST YEAR
8 2019’s essential headlines
TIMELINE
26 Not so merry go-round
Key events in PM Saad
Hariri’s tenure
4
EXECUTIVE
ROUNDTABLES
30 A gathering of minds
Executive’s roundtable initiative
32 Rotten to the core
Corruption looms over all
aspects of Lebanese life
36 The gloves are off
Hard new looks at the tech
ecosystem and its entrepreneurial future
40 No student left behind
Reinventing Lebanese education for an uncertain future
44 A battle on many fronts
People outclass politicians on
women’s rights, expression
rights, and responsibilities
48 In absence of fiscal policy
The search for a fairer, more
redistributive tax system
52 Seeking wisdoms
of ethical crowds
Transition scenarios and their
bleak alternatives
REFLECTION
56 Shadows of things to come
Reflections during tumultuous times
executive-magazine.com
5
Executive 2019-2020
ExecutivE
Responsible director Antoine Chidiac
Managing director & editor-in-chief Yasser Akkaoui
Editor-at-large
Managing editor
Deputy editor
Hospitality & tourism editor
Photojournalist
Art direction
Contributors
Operations manager
Web development manager
Marketing representative
Print & online advertising
Public relations manager
Subscriptions manager
Subscriptions
Distribution manager
Accountant
Thomas Schellen
Susan Wilson
Sarah Shaar
Nabila Rahhal
Greg Demarque
(Additional photos from Getty, AFP, Reuters)
Tanya Salem
See Economic Roadmap 3.0
Lucy Moussa
Rabih Ibrahim
Karine Ayoub Mattar
Michele Hobeika
Maguy Ghorayeb
Roula Emanuel
Gladys Najjar
Katia Massoud
Fadi Bechara
Published by NewsMedia sal
Sehnaoui Center, 7th floor, Ashrafieh, Beirut
Tel/fax: 01/611-696
editorial@executive.com.lb
Contact us – We need your input.
Please contact us with any suggestions or comments at:
www.executive-magazine.com or
editorial@executive.com.lb
For subscriptions – subscribers@executive.com.lb
© 2019 All rights reserved. Copying for purposes other than personal or internal reference use without express written permission from NewsMedia sal is prohibited.
6
executive-magazine.com
7
Executive 2019-2020
LAST YEAR
JANUARY
Protesters decry political
and economic crises
People took to the streets
across Lebanon from midDecember through January
to protest the country’s worsening political and economic
situation. A demonstration
in Beirut on January 20 drew
a crowd estimated at several
thousand, who marched to
the finance ministry to protest
supposed plans to increase
value-added tax and cut fuel
subsidies. Previous protests in
mid-January took aim at government corruption.
Five dead in winter storms
Two January storms battered Lebanon, resulting in
five deaths and disproportionately affecting vulnerable
refugee communities. Storm
Norma ravaged the country
from January 6 - 10, flooding
populated areas countrywide
and killing an eight year-old
Syrian girl in Minyeh. Starting on January 15, a second
storm, Miriam, raged for
several days, during which at
least four people were killed
and another 10 injured.
McKinsey report and
Moody’s downgrade
highlight economic
morass
The economy ministry on
January 2 released a 1,200
page (slides) plus report by
McKinsey, commissioned by
the government in 2017 for
$1.3 million, to analyze and
8
outline plans to ameliorate
Lebanon’s ailing economy.
The report stated that Lebanon was trapped in a “vicious economic cycle,” and
highlighted five key sectors
for the country to focus on
to achieve economic growth.
Lebanon’s economic woes
were in sharp focus, after
local daily Al-Akhbar published comments by thencaretaker finance minister,
Ali Hassan Khalil, on January 10, in which he suggested Lebanon may restructure
its debt. As a result of the
comments, which Khalil
later denied, Lebanese eurobonds dropped to thenrecord low values. Moody’s
investor service announced
on January 21 that Lebanon’s
long-term investment rating had been downgraded
due to the heightened risk
of debt rescheduling by the
government.
Key absences make for
toothless Arab summit
Internal Lebanese issues
and international political
divisions resulted in a disappointing turnout at the
Arab Economic and Social
Development Summit held
in Beirut on January 19 - 20,
during which Lebanese officials called for the return
of Syrian refugees. Of the 22
Arab League member states,
20 attended the summit,
however, most were represented by prime ministers,
foreign ministers, or finance
ministers; only three of the
eight expected heads of states
showed up. A key sticking
point deterring Arab leaders was disagreement over
whether Syria should rejoin
the league in reversal of its
2011 suspension. An additional layer of animosity
emerged following protests
in Lebanon against the involvement of Libya, where
Shiite cleric Imam Musa alSadr disappeared in 1978, resulting in the Libyan delegation boycotting the summit.
Following the summit, on
January 21, Qatar announced
its intention to buy $500 million in Lebanese government
bonds—this purchase has to
date not been documented.
A new cabinet is formed
After 252 days without a government, Lebanon’s cabinet
was announced on January
31. The 30-member cabinet
was formed following a flurry of speculation and the announcement that Lebanese
Forces leader, Samir Geagea,
had agreed to trade the Culture portfolio for Minister of
State for Administrative Development. The new cabinet
was being hailed as a government of national unity, with
no one party achieving a definitive blocking third. There
were also four female ministers announced: Violette
Safadi as minister of state for
the empowerment of women
and youth, May Chidiac as
minister of state for administrative development, Nada
Boustany as energy minister,
and Raya el-Hassan as interior minister, the first Lebanese
woman to hold that position.
executive-magazine.com
THE END OF THE MONTH
DOESN’T HAVE TO BE
THE END OF THE WORLD
Spread your expenses with BONIFIKA LBP CARD
With BONIFIKA LBP TITANIUM credit card in Lebanese Pounds,
you don’t have to limit yourself to your income anymore.
Tailored to fit your needs and lifestyle, settle your purchases in
Lebanon and pay later. You will also enjoy various benefits from
insurance coverage to rewards and much more.
BONIFIKA LBP TITANIUM
CREDIT CARD
9
Executive 2019-2020
LAST YEAR
FEBRUARY
Lebanese man sets
himself on fire over
child’s school fees
Georges Zreik, a taxi driver
from north Lebanon, lit
fire to himself outside his
daughter’s school on February 7 in protest over the
school’s refusal to release
his daughter’s transcript.
Zreik was rushed to a hospital in Tripoli where he
later succumbed to his injuries. Local media reports
indicated that the dispute
between Zreik and Bkeftine Orthodox College, a
private elementary school,
was over the late payment
of school fees. There were
disagreements between the
school and Zreik’s family as
to what was owed and how
much Zreik had paid. The
education ministry ordered
an investigation into the incident, telling the press that
Zreik had not approached
them over the issue. Zreik’s
death sparked sympathy and outrage across
the country.
Cabinet gains the confidence of Parliament
Parliament voted to give
confidence to the new cabinet on February 15, with
111 in favor, six against,
and 11 absent. The cabinet’s
ministerial statement largely focused on economic issues. Over the course of the
three-day session, however,
there were several verbal
10
spats in the chamber, most
notably between Hezbollah MP Nawwaf Moussawi
and Kataeb MP Nadim
Gemayel, which led the
Hezbollah MP to be reprimanded by his party. Cabinet, meanwhile, also got off
to a rocky start when the
new minister for the displaced, Saleh Gharib, visited Damascus on February
20 to discuss the refugee
file. The visit marked a major shift from the previous cabinet, in which the
refugee portfolio was with
the Future Movement,
and caused disagreement
within the new cabinet that
forced the early breakup
of its first session on
February 21.
First meeting after
PM Hariri wins
confidence vote
First meeting after government formation was held on
February 18 with the International Financial Corporations
and the Council of Development and Reconstruction.
to tackle the next steps
into implementing CEDRE,
which included discussions
of a 22-point economic plan
needed to unlock funds.
UK labels Hezbollah’s
“political wing” as a terrorist organization
The UK Home Secretary,
Sajid Javid, announced on
February 25 that the UK
would be designating the
entirety of Hezbollah as
a terrorist organization,
meaning that being a member of, or offering support
to, Hezbollah would now
be a criminal offense in the
UK. The UK Home Office
and its Lebanon ambassador released statements reaffirming the UK’s support
for Lebanon despite the ban.
However, the ban meant
that any UK group funding or supporting projects
from the health or youth
and sports ministries would
no longer be accessable as
these are controlled by Hezbollah or Hezbollah-linked
individuals.
Court rules in LBCI
dispute
On February 28, Judge Fatima Jouni ruled that the Lebanese Forces (LF) would not
regain ownership of LBCI,
dropping charges against
current chair Pierre Daher.
LF leader Geagea filed a
lawsuit in 2007, where he
sought to restore ownership
of the channel and denied
having sold it to Daher. The
LF owned the station under the name LBC until the
party transferred ownership
of the station in 1992 when
it became apparent Geagea
would face jail-time. The
judge ruled that LBC was
established by funds raised
by the LF’s then-militia and
so—based on the premise
that funds raised during the
civil war are the property of
the Lebanese state and people—had Daher not established LBCI with funds he
secured in bank loans then
the channel would have
been state property.
executive-magazine.com
11
Executive 2019-2020
LAST YEAR
MARCH
Budget passage delayed, government calls
for cuts
On March 5, Finance Minister Ali Hasan Khalil announced that the finance
ministry had handed over
its report on public sector
spending between 1993 and
2017 to the Court of Audit,
the body tasked with auditing public finances. This
came on the heels of Hezbollah MP Hasan Fadlallah accusing former Finance and
Prime Minister Fouad Siniora on March 1 of illegally
spending $11 billion during
his tenure, an accusation
Siniora denied. The Court
of Audit investigation and
delays in cabinet formation
had temporarily stalled the
passage of the 2019 budget.
Lawmakers were looking to
slash spending to reduce the
budget deficit so that the
state can access $11 billion
pledged by foreign donors
and lenders.
Lebanon appeals for
funds at Brussels III
At the Brussels conference
on “Supporting the future
of Syria and the region”
on March 12 - 14, Prime
Minister Saad Hariri asked
for help in facilitating the
return of more than 1 million Syrian refugees from
Lebanon to Syria. Notably
missing from the ranks of
the Lebanese delegation in
Brussels was Saleh Gharib,
12
Minister of State for Refugee Affairs. Hariri’s Future
Movement is opposed to
normalizing ties with Syria,
while Gharib is close to the
Lebanese Democratic Party
that has ties to the Syrian
government. At the conference, which aimed to garner financial support for
states that host Syrian refugees, Hariri requested $2.6
billion that he said would
appropriately fund Lebanon’s response plan to the
crisis. Pledges for the region
in 2019 reached $7 billion.
Cabinet appoints Military Council, considers
new electricity plan
The cabinet filled four vacant spots on the Military
Council in March 21 meetings as part of a 54-item
agenda. Also during the
cabinet meeting, Minister
of Energy and Water Nada
Boustani introduced plans
to solve the country’s electricity problems. The cabinet
said it formed a committee to further evaluate the
present electricity plan and
would also look into onshore
oil and gas exploration laws.
The new plan’s goals were to
reduce Electicité du Liban’s
(EDL) financial deficit and
improve electricity through
measures that include building two new power plants in
Selaata and Zahrani.
US Secretary of State
Pompeo visits Lebanon
US Secretary of State Mike
Pompeo visited Lebanon
March 22 - 24. Pompeo met
with top state officials and
Lebanese Army Commander Joseph Aoun, stressing
US support for the Lebanese
Armed Forces. Pompeo repeatedly spoke against Iran
and Hezbollah, branding
the former an “outlaw nation” and the latter “its terrorist affiliate.” Speaking
at a press conference with
Pompeo, Foreign Minister
Gebran Bassil made the
point of stating that Hezbollah has popular support
in the country and was not
a terrorist organization. In
response to Pompeo’s statements, Hezbollah Secretary
General Hassan Nasrallah
stated in a March 26 speech
that Israel, with US backing,
was a danger to Lebanon.
Aoun meets with Putin
on refugee file
President Michel Aoun
met with Russian President
Vladimir Putin on March
26, as part of an official visit
to Moscow. Both presidents
expressed support for Russia’s refugee return initiative.
Russia had offered to help
repatriate Syrian refugees
from Lebanon, Jordan, and
Turkey 2018 but the plan,
which drew concerns from
the UN and other stakeholders, was on hold due
to funding issues. Also discussed was the US’ decision
on March 25 to officially
recognize Israeli sovereignty in the occupied Golan
Heights, with Aoun reiterating his strong opposition to
the move.
executive-magazine.com
13
Executive 2019-2020
LAST YEAR
APRIL
Second round of oil and
gas licensing launched
On April 4, the cabinet approved the launch of Lebanon’s second offshore oil and
gas licensing round. Energy
Minister Nada Boustani announced the new tender
the following day at a press
conference. Cabinet approved the recommendation
of the Lebanese Petroleum
Authority to open Blocks 1
and 2 in the northern Exclusive Economic Zone, Blocks
8 and 10 in the south, and
Block 5 in the middle of the
Exclusive Economic Zone.
Companies must form a
consortium of three companies to place a bid for tender,
due January 31, 2020.
Electricity plan passed
The Council of Ministers
approved a new electricity policy paper on April 8
that according to the energy
ministry was aimed at providing 24-hour electricity
and reducing EDL’s deficit.
The plan entailed building
six new power plants over
the next six years, and was
scheduled to be implemented in full over the next
decade with short-term and
long-term measures specified. The plan sought to
secure 1,450 MW of temporary power by early 2020
to reach 3,500 MW output,
which would be enough
to secure round-the-clock
power. In the long term,
14
the policy called for new
electricity generation plants
to be built at Deir Ammar,
Zahrani, Selaata, Zouk,
Hreisheh, and Jiyyeh. EDL
forecasted that their deficit
would shrink from $1.4 billion in 2019 to $574 million
in 2020.
New US measures target Iran, Hezbollah
Hezbollah Secretary General Hassan Nasrallah said that
they would retaliate should
Washington take steps to
“threaten our nation” in an
April 10 speech. He added
that the US’ designation of
the Islamic Revolutionary
Guard Corps—a branch
of Iran’s armed forces—as
a terrorist organization on
April 8 was reflective of current US foreign policy. In a
March speech, Nasrallah
had called on Hezbollah’s
supporters to donate to the
party, the finances of which
have been targeted by US
sanctions, and warned that
sanctions were likely to get
worse. He called sanctions
and terror designations a
“form of war.” On April 17,
US Secretary of State Mike
Pompeo said that President
Trump would increase pressure on Iran; on April 22
the US announced it would
end sanction exemptions for
major importers—a move
intended to limit Iran’s ability to export oil. On April
23, the US launched a $10
million reward program
for information that could
help identify Hezbollah financial networks.
Jamali wins Tripoli
by-election
The Future Movement’s
Dima Jamali was victorious
in Tripoli’s by-election on
April 14, winning Tripoli’s
fifth Sunni parliamentary
seat with 68 percent of the
vote, according to preliminary figures released by the
Future Movement. Turnout, however, was only 12
percent.
Leaked draft budget light
on austerity measures
On April 27, a truncated version of the 2019 budget was
leaked, containing the main
budget proposals due to be
debated by cabinet on April
30. Notably absent from the
document were nine pages
which, based on the appendixes, contained austerity
measures like a 3 percent reduction on the monthly pension of retired military personnel. However, the leaked
budget did not seem to align
with Prime Minister Saad
Hariri’s April 17 comments,
when he had warned the Lebanese to prepare for “unprecedented” austerity to ward off
a national economic “catastrophe.” On April 30, retired
military and security personnel blocked the entrances to
the Port of Beirut and Banque
du Liban (BDL), Lebanon’s
central bank, to protest any
budget measure that would
affect their pensions. Preemptive protests by public
sector workers also took place
earlier in the month.
executive-magazine.com
You see a family recreating art.
At Fidus,
we see a USD 57 million
Van Gogh masterpiece.
We know a good investment when we see one
Private Wealth Management • Trading and Capital Markets • Funds & Structured Products Advisory
+961.1.990600 • www.fidus.com.lb
15
Executive 2019-2020
LAST YEAR
MAY
Former Maronite
Patriarch Cardinal
Sfeir dies at 98
Former Maronite Patriarch Cardinal Nasrallah Boutros Sfeir died on
May 12, days before his
99th birthday. Sfeir was
laid to rest in Bkirki on
May 16, with thousands
of mourners in attendance. Appointed patriarch
on April 19, 1986, during
the Lebanese Civil War,
Sfeir was made cardinal
by Pope John Paul II in
1994. He was succeeded
by the current patriarch,
Beshara Rai, in 2011.
US agrees to mediate
border talks between
Lebanon and Israel
On May 18, the US agreed
to Lebanon’s request to mediate talks between Lebanon and Israel to demarcate the maritime border.
On May 27 Israel agreed
to take part in these negotiations. The talks were
touted to be headed by
US Assistant Secretary of
State for Near Eastern Affairs David Satterfield, and
aimed at settling the land
border dispute with mediation from the UN. There
are nearly 860 square kilometers of disputed waters
claimed by each country.
State wraps up probe
on illegal hires
16
MP Ibrahim Kanaan,
chair of Parliament’s Finance and Budget Committee announced on
May 23 that a probe into
illegal state hiring found
that 37,000 employees
had been hired unlawfully. Article 21 of Law
46 (2017) had called for
a freeze in public-sector
hiring to reduce state expenditures. The committee discovered that thousands of employees hired
in public administrations
held positions with no
legal description; 37,022
employees were hired in
violation of laws and regulations, 5,013 were hired
during the freeze, and the
other 32,009 were hired
before the freeze went into
effect. Many of these employees were hired before
the 2018 parliamentary
elections, fueling allegations that this was done
to boost parties’ electoral
support.
2019 budget
approved by Cabinet
On May 27, Lebanon’s
state draft budget was
approved by the cabinet
after weeks of wrangling
and missed deadlines.
The draft was passed on
for parliamentary approval, which Speaker Nabih
Berri said at the time
may take another month.
Roiled by rumored austerity measures, protesters
had taken to the streets
over the previous month.
The latest round of protests took place as cabinet
met to approve the budget, with veterans expressing concern over potential cuts to their pensions.
The 2019 budget had been
touted by Prime Minister
Saad Hariri as one of the
“most austere in the history of Lebanon,” with
politicians scrambling to
agree on measures to raise
revenues and decrease
spending, in the hope of
unlocking some of the $11
billion in funding pledged
by international donors at
CEDRE. The budget deficit, 11.5 percent in 2018,
was to be reduced to 7.59
percent, per the draft
budget. Also included was
a plan to cut $660 million
from the debt servicing
bill by issuing treasury
bonds at 1 percent interest to the Lebanese banking sector. Other measures included a 2 percent
tariff on imported products and an increase to
a 25 percent income tax
on individuals and enterprises earning an annual
income of LL225 million
or higher. Civil servants
on pensions and current
and former prime ministers, house speakers,
MPs, and presidents were
to pay income tax. Three
percent were to be deducted from retirement salaries for army personnel
to fund their healthcare
and social assistance
benefits.
executive-magazine.com
CREATIVE IS GOOD.
CREATIVITY PAIRED
WITH RELEVANCE
IS GREAT.
We present to you our new advertising tools,
assuring the relevance of your digital out of home campaigns
based on the following triggers:
For a full presentation on Pikasso Transformation or for more details, please contact us at +961 1 290390
Pikasso’s transformation marks the start of a new era in planning, booking and broadcasting your Digital Out-of-home
(DOOH) campaign.
You can customize and personalize your content based on the most meaningful triggers that will deliver contextually
relevant messages, to which your customers will relate, thus optimizing your R.O.I.
Pikasso is committed to make striking DOOH campaigns accessible to all budgets.
To learn more, visit pikasso.com, or contact us at: +961 1 290390
Lebanon I Jordan I Iraq I Algeria I Tunisia I Morocco I Senegal I Ivory Coast I Mali I Armenia
17
Executive 2019-2020
LAST YEAR
JUNE
Four security personnel killed in Tripoli
attack
A lone gunman killed
two army officers and two
members of the Internal Security Forces (ISF),
wounding others, in an
attack on June 3. AbdelRahman Mabsout was reported to have fought with
Daesh in Syria. He was
shot and killed when security forces stormed the
residential building he was
holed up in.
Lebanon close to talks
on maritime borders
with Israel, Syria
Israel Energy Minister Yuval Steinitz announced on
June 19 that Israel expected to start US-mediated
talks with Lebanon to demarcate their shared maritime border in July.
The talks had hit a roadblock over the level of UN
involvement in any future
negotiations, for how long
Israel would halt construction in disputed areas, and
whether negotiating points
may be delivered verbally
or in writing. In Russian
news outlet Sputnik on
June 15, Defense Minister
Elias Bou Saab said that
Syria was also looking to
demarcate its maritime
border with Lebanon. The
minister said that the Russians had an economic
interest in the issue, given
18
that Russia’s Novatek is
part of a consortium of international oil companies
set to begin exploration in
Lebanon’s offshore Block
4 in December. On July 5,
the Israeli Energy minister
“voiced frustration” with
the refusal of the Lebanese
side to take part in talks.
Budget committee
takes month to review
draft budget
On June 25, MP Ibrahim
Kanaan, head of Parliament’s Finance and Budget
Committee
announced
that the committee had approved 80 percent of the
draft budget and would finish its review in early July.
Moody’s Investors Service
said in a June 25 credit
analysis that despite inclusion of fiscal consolidation
measures in the 2019 draft
budget, Lebanon was seen
to be at an increased risk
of debt rescheduling or a
different liability management exercise due to slowing capital inflows in Lebanon and weaker deposit
growth.
“Peace to Prosperity”
conference takes place
in Bahrain
On June 25 - 26, Bahrain
hosted the US-led “Peace
to Prosperity” workshop,
a proposal for solving the
Israeli-Palestinian conflict
that US President Donald
Trump has called the “deal
of the century.” As an official Palestinian delegation
boycotted the conference,
Lebanon abstained from
sending a delegation, as
did Iraq. The official Israeli delegation pulled out
of the workshop, citing
security concerns; Israeli
businessmen and members
of the Israeli press were
still present. On June 23,
speaking ahead of the conference about Lebanon’s
refusal to attend, Speaker
Nabih Berri said that any
offer intended to help the
Palestinians must recognize refugees’ right to return. The plan earmarked
$6.3 billion primarily for
infrastructure projects
in Lebanon.
Lebanese University professors suspend
strike
On June 28, Lebanese University (LU) professors decided to suspend an ongoing strike, after Education
Minister Akram Chehayeb
promised to address their
concerns. Teachers had begun striking on May 6 over
concerns the draft budget
would reduce LU’s funding
by nearly 9 percent, equalling $25 million. Cuts to
state contributions to salaries would be 10 percent,
or $2 million. Chehayeb
said that an agreement had
been reached with Finance
Minister Ali Hasan Khalil to
exempt LU professors from
budget item Article 90 that
would increase the minimum period state employees
must work before they can
retire from 20 to 25 years.
executive-magazine.com
JULY
Cabinet work
stalled over
Qabr Shmoun
incident
On July 2, Prime Minister Saad Hariri decided
to postpone a cabinet
meeting following tensions over the shooting in
Aley that took place the
preceding weekend. Two
aides of Minister of State
for Refugee Affairs Saleh
al-Gharib were killed in
Qabr Shmoun following
a confrontation between
his convey and armed men
affiliated with the Progressive Socialist Party (PSP).
The clash took place in
the context of a tour of
the area by Free Patriotic
Movement (FPM) leader,
and foreign minister, Gebran Bassil, accompanied
by the Lebanese Democractic Party (LDP)-affiliated Gharib, which had met
with backlash from local
PSP supporters. There
were conflicting narratives
as to who fired first. LDP
leader Talal Arslan called
for the Aley shootings to
be taken to the Judicial
Council, Lebanon’s highest
judicial court; the cabinet
was split on the issue. An
attempt by General Security head, Abbas Ibrahim,
to negotiate between the
two sides to have the case
tried in front of the military tribunal was rejected
by Arslan.
Labor crackdowns
lead to protests
by Palestinians
Labor Minister Camille
Abousleiman announced
on July 10 that inspectors
had raided 214 businesses
as part of a crackdown on
illegal labor in the country. Employers had been
given a one-month grace
period to register their
foreign workers and enroll them in the National
Social Security Fund, but
despite this, 20 shops
were shuttered, 129 were
given violation notices,
and 24 warnings were issued. Primarily, the raids
targeted Syrian refugees, who were limited
to working in the agricul-
ture, construction, and environment/cleaning sectors, and needed to obtain
sponsorship from an employer. However, the move
sparked mass protests in
all 12 Palestinian refugee
camps across the country,
with Palestinians arguing
they cannot be treated as
foreign workers as they
were not able to provide
the documents necessary
to obtain labor permits.
Palestinians in Lebanon
have long had limited
access to employment,
often working in the informal economy, moving
between employers. As of
July 24, Abousleiman had
taken measures to quell
the protests, by, for exam-
ple, exempting Palestinians from having to enroll in social security, but
protests were still ongoing
several months later.
2019 Budget passed
by Parliament
On July 19, Parliament
passed the 2019 state
budget, which passed with
83 votes for, 17 against,
and one abstention. President Michel Aoun delayed
signing the budget until
July 31, citing issues with
article 80 that would cause
all civil service applicants
who have passed the Civil
Service Board exams to
be hired. This was seen as
problematic for those who
wish to keep a sectarian
balance within the civil
service, as it would tip the
scales in favor of Muslim
representation. The approved budget sought to
reduce the deficit to 7.6
percent of GDP from 11.5
percent in 2018. The IMF
estimated the plan would
fall short, instead estimating a 9.75 GDP deficit.
The budget included efforts to cut public spending and increase revenue
generation.
Concerned
the budget would reduce
their benefits, army veterans protested the budget,
and on the day lawmakers
passed the budget, protestors attempted to storm
Parliament. Employees of
the state-run telecommunications company Ogero
also protested cuts to their
salaries proposed in the
draft budget the day prior
to its adoption.
19
Executive 2019-2020
LAST YEAR
AUGUST
Cabinet meets after
six-week deadlock
Cabinet met on August 10
after six weeks of political deadlock following the
security incident in Qabr
Shmoun. Four days prior
to cabinet reconvening, EU
officials postponed a scheduled visit to Lebanon, calling for normal government
activity to resume. Cabinet
announced investigations
would be launched into the
late June security incident.
On August 12, Prime Minister Saad Hariri went on
a five-day trip to America,
the last day of which he had
a 40-minute meeting with
US Secretary of State Mike
Pompeo where he thanked
him for America’s commitment to the Lebanese
army. At a following session on August 22, cabinet
announced its share of five
appointees out of a total of
10 to the Constitutional
Council. Parliament had
previously elected their five
representatives at the end
of June. A special session
was also held on August
27 to tackle the country’s
mounting waste problem,
with most elements of
Minister of Environment
Fady Jreissati’s waste management roadmap being
adopted.
Fitch downgrades
Lebanon, S&P maintains rating
20
International credit ranking agency Fitch downgraded Lebanon’s credit
rating August 23 to CCC
from its previous B- rating.
Standard & Poor maintained its B-/B long- and
short-term foreign and
local currency sovereign
credit rating. In a statement
on the decision to downgrade Lebanon to CCC,
Fitch noted: “The downgrade of Lebanon’s IDRs
reflects intensifying pressure on Lebanon’s financing model, increasing risks
to the government’s debt
servicing capacity. Downward pressure on banking
sector deposits and central
bank foreign reserves and
increasing dependence on
unorthodox measures by
the central bank (Banque
du Liban) to attract inflows
illustrate increased stress
on financing.”
Tensions rise after Israeli drone strikes
The latest round of escalations between Hezbollah and
Israel began August 25 when
one Israeli drone crashed
and another exploded over
Hezbollah’s media offices in
Dahiyeh, south Beirut, injuring three. Hours earlier,
Israel had launched attacks
that killed two Hezbollah
fighters in Syria. Hezbollah
leader Hassan Nasrallah responded to the attacks, saying that they were a violation
of the rules of engagement.
Further escalating tensions,
Israeli warplanes hit a Popular Front for the Liberation
of Palestine (PFLP) base
east of Zahle near the Syrian
border on August 26. The
PFLP fought inside Syria
alongside Hezbollah and
the Syrian army. President
Michel Aoun issued a statement August 26, likening
the strikes in Dahiyeh to a
“declaration of war,” while
Prime Minister Saad Hairiri
met with ambassadors and
the deputy heads of mission
of the UN Security Council
to discuss the violation of
Security Council Resolution 1701. The UN called for
“maximum restraint” from
all sides. Sources close to
Hezbollah told Reuters on
August 27 that Hezbollah
was preparing a “calculated
strike” against Israel, but
sought to avoid a new war.
Lebanon’s Higher Defense
Council met on August 27,
affirming “the right to defend themselves against any
attack.”
US sanctions Jammal
Trust Bank
The US Department of the
Treasury’s Office of Foreign
Assets Control sanctioned
Jammal Trust Bank for allegedly facilitating banking
activities for Hezbollah. The
Lebanese bank responded
that it would appeal the decision. The Association of
Banks in Lebanon said it
regretted the decision, and
assured customers their
money in the bank would
be safe. The bank underwent
voluntary liquidation in
September.
executive-magazine.com
SEPTEMBER
Hezbollah Israel flareup cools, but US ups
pressure with sanctions
Hezbollah fired several anti-tank missiles across the
border toward the village
of Avivim in Israel on September 1 following a series
of escalations in August.
Hezbollah claimed to have
destroyed an Israeli military
vehicle in the attack, killing and wounding those
inside—Israel denied casualties. In response, the Israeli
army fired over 100 artillery
shells targeting areas near
Maroun al-Ras in Lebanon.
Pressure on Hezbollah continued to mount as the US
had imposed new sanctions
on four members, including
senior members of Hezbollah’s Jihad Council. On September 22, US Treasury’s Assistant Secretary for Terrorist
Financing Marshall Billingslea arrived in Lebanon for
a two-day visit, where he assured Lebanese officials that
the US did not have a list of
Lebanese banks it intended
to target, but repeated that
the goal of the US treasury
was to deprive Hezbollah of
its financial support.
Cabinet studies
2020 budget
Officials declared a “state of
economic emergency” on
September 2. In an effort to
secure funds totaling more
than $11 billion pledged at
CEDRE, Lebanon sought
to pass the 2020 budget on
time in order to begin fiscal reforms. Prime Minister
Saad Hariri told reporters on
September 15 that the budget
is part of a three-year plan
linked to the 2021 and 2022
budgets. On September 27,
according to The Daily Star,
Telecommunications Minister Mohammad Choucair, a
budget committee member,
hinted there could be new
taxes to help generate revenue
and reduce the state’s deficit.
Lebanon eyes unlocking CEDRE funds
Prime Minister Saad Hariri
met with the French envoy
in charge of following up
on the implementation of
CEDRE, Pierre Duquesne,
on September 5. At a press
conference at the end of
his visit, Duquesne assured
Lebanese politicians that
no donors had expressed
an intent to cut funds, but
said Lebanon needed to act
quickly to implement fiscal
and infrastructure reforms.
Hariri headed to France to
meet with French President Emmanuel Macron
on September 20, to discuss CEDRE investment.
Hariri also discussed Saudi
engagement with CEDRE
projects with Saudi Finance
Minister Mohammed alJadaan on September 21.
In its September 23 session, cabinet agreed to form
a ministerial committee
to tackle essential reform
measures. On September
24, President Aoun met
with Macron to discuss
CEDRE funds in New York
on the sidelines of the UN
General Assembly meeting.
Future TV suspends
operation
On September 18, Prime
Minister Saad Hariri announced the suspension of
Future TV’s operations. As a
result of Future TV’s closure,
over 350 workers lost their
jobs after being on strike
since July 30 for not receiving
their salaries for 24 months.
Fears of dollar shortage
sparks strikes, protests
Protests broke out across
Lebanon on September 29
over the country’s worsening economic situation. On
September 18, gas stations
had shut down in protest
over an inability to secure
dollars at the official rate. An
open-ended strike began on
September 26, but was suspended the following day
after the central bank agreed
on a mechanism to allow
gas stations owners to purchase gasoline at the official
peg. Fear over the potential
dollar shortage was stoked
by residents facing issues
withdrawing dollars and
depositing Lebanese lira in
dollar accounts, along with
higher unofficial exchange
rates. BDL Governor Riad
Salameh promised to issue
a new circular on October
1 to organize the provision of dollars to banks at
the official rate to secure
imports of petrol, medicine,
and wheat.
21
Executive 2019-2020
LAST YEAR
OCTOBER
Strikes over dollar
shortages continue
On October 1, Banque du
Liban Governor Riad Salameh issued a new circular to organize the provision of dollars to banks at
the official rate to secure
imports of petrol, medicine, and wheat. Despite
this, on October 8, mill
owners announced they
would begin selling their
products in dollars, not
lira. On October 10, the
Union of Bakery Owners
threatened to begin striking four days later if no
solution was found to the
dollar shortage that made
it difficult for bakers to
secure supplies at the official exchange rate. Importers pay for their products
in dollars but sell them in
lira. On October 15, Prime
Minister Hariri met with a
delegation from the Syndicate of Bakery Owners, and
the strike was called off after Hariri pledged to solve
the issue within 48 hours.
Similarly, on October 11,
in a televised news conference, Sami Brax, head of
the Syndicate of Gas Station Owners, said that state
officials had failed to honor
an agreement that allowed
them to purchase fuel with
the local currency. Gas station owners also said banks
were not supplying them
with dollars needed to buy
imports following a short22
age in dollar reserves. Fuel
importers and gas stations
went on strike across the
country. On October 12,
Hariri again assured gas
station owners that they
would be able to purchase
fuel with Lebanese lira,
ending the strike.
Wildfires devastate
Lebanon
Wildfires broke out in
Lebanon beginning Monday, October 13. Over the
next two days, 125 fires
spread across the country.
In 48 hours, between 1,300
and 1,500 hectares were
burned, doubling yearly
average losses of 1,200 to
1,300 hectares, which had
already been lost this year.
Two people died as a result
of the wildfires, one from
smoke inhalation and
another who was struck
down by an emergency
vehicle. The Lebanese
Red Cross reported that
18 were hospitalized and
88 received medical care.
Three Sikorsky firefighting helicopters donated to
the government in 2009 by
a coalition of citizens had
not been maintained; Lebanon had to rely on help
from Cyprus, Jordan, and
Italy to put out the fires
alongside Lebanon’s own
volunteer firefighters. A
thunderstorm in the evening of October 15 played
a large role in putting out
the bulk of the fires.
Economic grievances
erupt into nationwide
protests
On October 17 protests
erupted across the country, triggered by media
reports earlier Thursday
that cabinet had agreed
on new taxes under the
2020 budget, including a
tax on Voice over Internet Protocols (VoIP) that
would have cost up to $6
per month for those using WhatsApp calls or
other VoIP apps. Clashes
between protesters and
bodyguards of Minister of
Education and Higher Education Akram Chehayeb
occurred in central Beirut,
with the bodyguards firing
shots into the air. A photo
of protester Malak Alaywe
kicking one of Chehayeb’s
armed bodyguards in the
groin became the first
icon of the protests. Reports described spontaneous protests breaking
out across the country,
from Tripoli in the north
to Sour in the south, with
protesters burning tires,
building bonfires, and
blocking roads. Two Syrian migrant workers were
killed after the Downtown
Beirut building they were
in was set alight. On October 18, then-Prime Minister Saad Hariri set a 72hour deadline for reforms.
Banks and schools were
shut across the country;
banks remained shuttered
for two weeks. On October
19, Secretary General Hassan Nasrallah backed the
cabinet in a speech. Protesters in Sour were met
executive-magazine.com
with violence. On October 20 protesters came out
in force, with estimates
of over a million people
demonstrating across the
country.
Hariri’s reform package, 2020 budget, fail
to quell protests
On October 21, Hariri announced his cabinet’s reform package, with measures including cutting the
deficit without increasing
taxes. The reforms did little to quell the protests.
Cabinet also passed the
2020 state budget October 21, which supposedly
aimed to enact no new
taxes but reduce the deficit to 0.6 percent, with the
Banque du Liban (BDL),
Lebanon’s central bank,
and private banks contributing $3.4 billion toward
this aim. On October 22,
artists stormed Tele Liban
in protest over its lack of
coverage of the uprising, while the head of the
National News Agency
(NNA), which had been
covering the protests,
Laure Sleiman, was dismissed. Minister of Information Jamal Jarrah
appointed Ziad Harfoush
as the new director of the
NNA. Hundreds of protesters gathered outside
BDL, chanting that Governor Riad Salameh was a
thief; similar protests were
staged in front of Tripoli’s
central bank branch. On
October 23, a week into
the uprising, protests in
Nabatieh turned violent,
leaving 15 injured; and
one person taken to the
intensive care unit. Amal
denied any involvement in
the clashes.
Aoun, Nasrallah
address the nation,
protesters create
human chain
On October 24, President
Michel Aoun addressed
the nation, announcing
that he would hold everyone who embezzled public
funds accountable and that
economic reform would
save Lebanon. He also said
that he was ready for “constructive dialogue” with
representatives from the
protest movement, which
remained leaderless. His
speech, which was prerecorded, fell on deaf ears.
Key thoroughfares in and
outside of Beirut remained
closed, despite some scuffles between the army and
protesters as the former
attempted to reopen them.
The Association of Banks
in Lebanon announced
that banks would reopen as soon as the situation stabilized. Schools
and universities remained
closed. On October 25,
Nasrallah made a second
speech, saying he refused
to accept the resignation
of the government and
alleging foreign backing
for the protests. Nasrallah called for roads to be
unblocked, but protesters
remained in the streets despite aggression from Hezbollah supporters in areas
including Sour, Nabatieh,
and Riad el-Solh prior to
the speech. On October
26, a 171-kilometer “Lebanese Human Chain” was
formed across the country,
from north to south, by
tens of thousands of Lebanese in an expressed manifestation of national unity.
Violence erupts in
Downtown Beirut,
Hariri resigns
On October 29, Hezbollah
and Amal affiliates carried
out unprovoked violent attacks against protesters at
the Fouad Chehab bridge,
known as “the Ring,” in
central Beirut. The group
of attackers, shouting slogans that identified them
as Hezbollah and Amal
supporters, moved on to
Riad el-Solh and Martyr’s
Square, attacking people with sticks and pipes
and destroying tents. Following the violence, and
nearly two weeks into
protests that had gripped
the entire nation, Hariri
announced his resignation
in a live address; under
the Lebanese constitution
this meant the resignation of the entire cabinet.
Afterwards, he headed to
Baabda Place and handed
his written resignation to
President Aoun, who accepted and the next day
issued a decree to keep the
government on in a caretaker capacity until a new
government was formed.
Under the constitution,
parliamentary consultations were to be held to
nominate a new prime
minister, who would then
be responsible for forming
a new cabinet.
23
Executive 2019-2020
LAST YEAR
NOVEMBER
Banks reopen,
protests continue
Banks officially reopened
on November 1, after being shuttered for two
weeks since the onset of
the uprising. No official
capital controls were announced, but banks did
set limits on withdrawals that varied from bank
to bank—and from day
to day. Also November 1,
Hezbollah Secretary General Hassan Nasrallah gave
his third address since the
protests began, decrying
the “unprecedented form
and amounts of cursing”
deployed by protesters.
Protesters demonstrating
inside the Association of
Banks in Lebanon building in Downtown were
forcefully removed and
arrested, with one protester detained overnight.
Protestors also gathered
in front of central bank
buildings in Beirut and
Saida, which led to a
clash between the army
and the Saida protesters
that left five injured. On
November 3, a counterdemonstration of Free Patriotic Movement (FPM)
supporters gathered in
front of Baabda Palace.
FPM head and caretaker
foreign minister, Gebran
Bassil, addressed these
supporters live, calling for
an end to roadblocks, the
lifting of banking secrecy
24
on officials’ accounts, and
the return of stolen public funds. Shortly after,
President Michel Aoun,
who had been noticeably absent in addressing
mass protests around the
country, gave a televised
address directly to FPM
supporters. Tens of thousands of anti-establishment protesters gathered
across the country.
Government formation
talks begin, Moody
downgrades Lebanon
On November 4, Caretaker Prime Minister Saad
Hariri and Caretaker Foreign Minister Gebran met
to discuss government
formation; no agreements
were announced. On November 5, Moody’s Investors Service downgraded
Lebanon’s credit rating
from Caa1 to Caa2, stating
that “widespread social
protests, the resignation of
the government and loss
of investors’ confidence
have further undermined
Lebanon’s
traditional
funding model based on
capital inflows and bank
deposit growth, threatening the viability of the peg
and macroeconomic stability.” On the 20th day of
protests, tactics changed;
students began to take
part, protesters marched
between public institutions and the army forcibly
reopened roads.
Siniora questioned
over missing funds,
government formation
talks continue
On November 6, former
Prime Minister Fouad
Siniora was called in for
questioning by Financial
Prosecutor Ali Ibrahim
over funds spent outside
state budget between 2006
and 2008. This came after a group of protesters
gathered outside Siniora’s
home in Hamra, Bliss
Street, the previous evening, calling for an investigation into the $11 billion
in extra-budgetary spending during his term. As
a first step to government
formation, Caretaker Prime
Minister Hariri and President Aoun met on November 7 to begin consultations
on choosing a new prime
minister and cabinet. Hariri
reportedly threatened to
withdraw his candidacy,
insisting on a technocratic
government in line with
protesters’ demand.
Parliamentary session
postponed, banks go
on open-ended strike
On November 11, Speaker
Nabih Berri postponed a
parliamentary session due
to take place the next day.
The session was scheduled
for November 19, but remained controversial over
plans to carry out a legislative session that included an amnesty bill some
protesters feared would
be used to protect those
who had embezzled public funds. Also November
11, in a speech the central
executive-magazine.com
bank governor Riad Salameh denied any change to
the official exchange rate.
This was followed by the
announcement of an openended strike from the bank
employees’ union, alleging
fears over staff safety at
banks. Hezbollah leader,
Hassan Nasrallah also gave
his fourth televised address of the protests, this
time alleging that the US
was preventing Lebanon
from conducting business
with China, Iraq, and Syria, and that the sanctions
imposed on Hezbollah are
aimed at “stirring sedition in Lebanon.” He also
called on the Higher Judicial Council to tackle corruption files targeting any
Hezbollah official. In the
evening, the president gave
a live interview in which
he controversially said that
those Lebanese who believed that there were no
decent people in government should emigrate.
Thousands protest
president’s speech,
one killed
Thousands took to the
streets the night of November 11 and the next day,
in response to President
Aoun’s speech the previous
evening. During the protests on the first night, a dispute between one protester,
Alaa Abou Fakhr, and an
army colonel whose car was
trying to pass by a roadblock results in 38-yearold father-of-three Fakhr
being shot dead in front
of his wife and son by the
army staffer who was driv-
ing the colonel. The army
opened an investigation into
the incident.
Ex-Minister Mohammad
Safadi touted as PM
candidate, hospitals
strike
On November 15, local media reported that ex-Minister Mohammad Safadi had
emerged as the agreed-on
candidate for prime minister. His name was confirmed
on November 16 by Caretaker Foreign Minister Gebran Bassil, who told press
that consultations were due
to start on the 18th—this
was denied by Baabda Palace, which has the authority to call such sessions.
Former Prime Ministers
Najib Mikati, Fouad Siniora, and Tammam Salam
all expressed their renewed
support for Hariri for Prime
Minister; Safadi withdrew
his candidacy on November
16. Also on November 15,
private hospitals carried out
a one-day strike, protesting
$1.3 billion in unpaid government bills and issues securing medical supplies due
to the dollar liquidity crisis.
Protests hit one month
mark, parliamentary
session blocked
On November 17, independent candidate Melhem
Khalaf was elected president of the Beirut Bar Association, coinciding with
celebrations in the streets
over the one-month anniversary of the uprising. On
November 19, a controversial parliamentary session
was postponed following
thousands of protesters
gathering in Downtown to
prevent Parliament from
sitting. Shots were fired
through the windscreen of
one car, as an unidentified
minister drove through the
protesters.
Protesters organize
Independence Day
marches, Khatib
touted as PM candidate
Lebanon celebrated its Independence Day on November
22, with protesters organizing civil parades that took
place in Downtown Beirut, in
lieu of the usual military parade. The official celebration
was moved to the Ministry
of Defense in Yarze. Banks
reopened on November 26,
after a two-week open-ended strike. The Association of
Banks in Lebanon released
a statement saying that
there would be $1000/day
withdrawal limit, but some
banks set limits much lower.
Caretaker Prime Minister
Saad Hariri also formally
withdrew his candidacy for
prime minister on November 26, clearing the way for
contractor Samir Khatib to
become the frontrunner; he
received Hariri’s backing on
December 3. However, on
December 8, the day before
consultations were scheduled to take place, Khatib
withdrew his candidacy after meeting with Lebanon’s
top Sunni authority, Dar
al-Fatwa. At time of writing, the consultations have
been postponed to December 16, with Hariri as the
frontrunner. Protests are
ongoing.
25
Executive 2019-2020
TIMELINE
By Sarah Shaar
Not so merry go-round
Key events in PM Saad Hariri’s tenure
2016
October 20
> Saad Hariri endorses presidential bid
of Michel Aoun.
October 31
> Aoun, backed by Hezbollah, is elected
president of Lebanon, ending a
two-year stalemate.
November 3
> Hariri named as prime minister, promises a
new, just electoral law.
December 19
> Hariri begins his second tenure
as PM, forming a 30 minister cabinet that includes all political parties with the
exception of the Kataeb party.
November 4
> Reading a televised statement, Hariri
resigns as PM of Lebanon from Riyadh citing
the overextension of Iran in the region
and fears of assassination.
November 12
> PM Hariri is interviewed by Future TV on the reasons behind his questionable resignation adding he will be returning to Lebanon
shortly.
November 17
> After spending a fortnight in Saudi Arabia
allegedly discussing Iran’s policies in Lebanon
and the region, President Emmanuel Macron
invites PM Hariri and his family to France to
discuss the region’s political climate
November 21
> PM Hariri arrives to Lebanon after meeting with Egyptian President Abdel Fattah el-Sisi in Cairo.
November 22
> After meeting with President Aoun,
PM Hariri postpones his resignation.
December 4
> PM Hariri withdraws his resignation stating that this decision is based
on the agreement that all members of the government stay out of the affairs of other Arab countries.
December 8
> PM Hariri attends a meeting with the International Support Group for Lebanon (ISG), chaired by the United Nations and France.
2017
26
March 23
> Cabinet approves first budget in 12 years.
April 4
> PM Hariri attends Brussels Conference I on Supporting the Future of Syria and the Region to receive international aid for refugees in Lebanon.
June 16
> New electoral law passes.
October 20
> Cabinet commissions McKinsey & Co.
to develop the Lebanese Economic Vision for
the value of $1.3 million in time for the Paris
donor conference (later named CEDRE)
in April.
October 25
> US Senate passes new sanctions
against Hezbollah.
October 30
> PM Hariri visits the crown prince
of Saudi Arabia Mohammad bin Salman.
January 12
> PM Hariri states that the 2018 budget will not include new taxes.
November 3
> PM Hariri meets with international affairs advisor to Iranian Supreme Leader Khamenei.
February 18
> Council of Ministers forms committee
headed by Hariri to study budget figures
2018
executive-magazine.com
PM Saad Hariri resigns after nearly two weeks of nation-wide anti-establishment protests.
March 12
> President Aoun signs draft state budget
decree referring it to Parliament.
March 14
> Rome II donor conference is held
to secure funding from France aimed
at empowering the Lebanese Army and other
national security institutes.
March 29
> Lebanon passes 2018 budget.
April 6
> PM Hariri attends CEDRE in Paris, with the government’s Capital Investment Plan in tow.
> Donors pledge $11 billion dollars toward
infrastructure projects in Lebanon,
on condition of fiscal reform.
April 18
> President Aoun signs 2018
state budget law.
April 24
> PM Hariri attends Brussels II to meet with EU officials who pledged to grant Lebanon part of 560 million euros in
refugee aid.
April 24
> President Aoun calls caretaker-speaker
Nabih Berri to reconsider article 49 of state
budget law which provides temporary
residency for foreigners who buy property
in Lebanon.
April 26
> Constitutional Council suspends
article 49 of budget law.
May 6
> Parliamentary elections take place under
new electoral law.
May 7
> Electoral results give Gebran Bassil’s Free
Patriotic Movement (FPM) the biggest bloc in Parliament, with 29 seats.
> Future loses seats, securing only 20.
May 12
> PM-designate Hariri dissolves Future Movement’s electoral body, electoral machine,
coordinating branches in Beirut, Western and Middle Bekaa, Koura and Zgharta.
May 22
> Cabinet approves plan to save electricity
sector in accordance with Energy Minister’s
proposals.
May 23
> Nabih Berri is reelected as Speaker of
Parliament, Elie Ferzli as his deputy.
May 24
> PM-designate Saad Hariri commissioned
to form new government.
May 28
> Deliberations to form new
government begin.
July 17
> Parliament elects 17 committees.
August 9
> PM-designate Hariri and Parliament Speaker
Berri meet to discuss cabinet formation.
Hariri states after the meeting that delays in
government formation have been the result of
a competition for shares in the coming cabinet.
September 3
> PM-designate Hariri announces that a
national unity government lineup has been
handed to President Aoun.
September 10 > President Aoun from Strasbourg:
Government will be formed soon as a balanced
formula is reached. No sect should monopolize
representation or marginalize any side.
October 9
> PM-designate Hariri says that Lebanon’s
economic situation calls for the immediate
formation of the government within the next
10 days. The FPM and Lebanese Forces continue
to argue over their shares.
27
Executive 2019-2020
TIMELINE
February 25
> First ever EU and Arab League Summit in Egypt kicks off with PM Hariri heading the Lebanese delegation in Sharm el-Sheikh.
March 5
> Ministry of Finance hands over all the
statements and documents necessary for the
Court of Audit to audit the public accounts
starting from 1993 until 2017.
April 8
> Council of Ministers adopts a new
electricity policy paper, aimed at
reforming the sector.
April 17
> PM-Hariri calls for the implementation of a
harsh austerity budget for 2019.
July 9
> The US sanctions Hezbollah lawmakers.
July 19
> State budget with austerity measures is
passed, four months past its deadline.
President Aoun, House Speaker Berri, and caretaker-PM Hariri celebrating
Lebanon’s Independence Day in Yarze
December 14
December 16
> After seven months of political deadlock,
members of the Sabaa Party block the
entrances of the ministries of labor, social
affairs, and industry to protest the delay in
government formation.
> Around a thousand people march from
Hamra to Riad el-Solh protesting against government policies and the economic
situation in a demonstration organized
by the Lebanese Communist Party and the Popular Nasserite Organization.
2019
January 7
28
> McKinsey’s LEV is made public by Caretaker
Minister of Economy and Trade Raed Khoury,
as a push from the ministry to accelerate
government formation. Says the delay in
publishing is the result of the delay in
government formation.
September 20 > PM Hariri suspends Future TV due
to financial troubles. Over 350 workers
lose their jobs after being on strike since
July 30 for not receiving their salaries
for 24 months.
September 26 > Interchangeable currency transactions on
ATMs are stopped with no official statement
from the Association of Banks.
September 30 > The New York Times publishes an article
on Hariri gifting South African model Candace
van der Merwe $16 million in 2013.
January 19
> The Arab League Economic and Social
Development summit takes place in Beirut
despite rumors of postponing due to disputes
between Lebanese parties over the
normalization of relations with the
Syrian government.
October 13
> 125 wild fires break out across Mount
Lebanon over two days with around 1300
acres burned. Three Sikorsky firefighting
helicopters donated to the government in
2009 could not be used as they were not maintained.
January 31
> PM Hariri forms a new 30-minister
government, after eight months of
deliberations.
October 17
> Reports of a WhatsApp tax ignite nationwide protests, reports of burning tires and road closures across Lebanon.
February 18
> First meeting after government formation
is held with the Economic and Social Council
to tackle the next steps into implementing
CEDRE which included discussions of a
22-point economic plan needed to unlock funds.
October 18
> Protests continue nationwide with schools
and banks ordered to close until the early
hours of the next morning, when security
forces start firing tear gas and protesters
move out of Downtown.
executive-magazine.com
> PM Hariri holds a press conference announcing a 72-hour deadline for the passing of the long overdue economic
reform plan.
> Protests continue nationwide calling for the fall of the regime.
October 19
> Hezbollah addresses protesters saying
that Lebanon cannot afford the time to form
a new government.
> Lebanese Forces announces the resignation
of its four ministers, marking the first tangible
success of protesters’ demands.
October 21
> PM Hariri announces a list of 17 reforms
approved by cabinet that propose to cut the
deficit and expedite administrative reforms
without increasing taxes on the people.
October 24
> President Aoun addresses the public for
the first time since the beginning of the
protests pushing the idea that PM Hariri’s
economic reform plan will save Lebanon
October 29
> PM Hariri resigns.
October 31
> President Aoun addresses the nation with
a televised speech vowing to work toward a
civil state and promising to implement a
unified Personal Status law.
November 1
> Banks open their doors.
November 3
> President Aoun and son-in-law Minister
of Foreign Affairs Gebran Bassil address
Pro-FPM demonstrators gathered in front of
Baabda palace in large numbers.
> Tens of thousands of anti-establishment protesters gather in Downtown Beirut and all around the country.
November 5
> Moody’s Investors Service downgrades
Lebanon’s credit rating from Caa1 to Caa2. > Road closures were forced open by the Lebanese Army on the 20th day of protesting.
November 6
> US Secretary of State Mike Pompeo: Iraq
and Lebanon deserve to set their own courses
free from Iranian Supreme Leader Khamenei.
> School and university students embark on nationwide protests after a threat that came from the headmaster of a school in Saida against student participation, citing repercussions would be expulsion and the inability to sit for their official exams.
November 7
> Ex-PM Fouad Siniora questioned
for hours about $11 billion missing
from state funds.
November 8
> Lawsuit filed against Caretaker FM Gebran Bassil for charges of embezzlement, money laundering and illicit enrichment.
November 12
> President Aoun: “If they [protesters] do not like it and there is not a single decent person in power, then they should go and emigrate.” Thousands take to the streets in anger after Aoun’s televised interview to denounce the emigration statement made, with one protester, Alaa Abou Fakhr shot dead
during an altercation with an army colonel and the driver of the colonel’s car.
November 15
> Ex-Minister Mohammad Safadi is touted as a candidate for PM, he is rejected by anti-establishment protesters.
November 17
> Melhem Khalaf, an independent candidate
is elected president of the Beirut Bar
Association.
> Uprising’s one month anniversary.
November 19
> Protesters block all entrances to
Parliament and prevent a legislative session
they deem unconstitutional. The session was
to include passing of a controversial
general amnesty law.
November 22
> In celebration of National Independence
Day, protesters organize a civil independence
parade, marching from several meeting points
in Beirut toward Martyr’s Square.
> In the official celebration, a military parade
is held on Ministry of Defense grounds in the Beirut suburb of Yarze in presence
of President Aoun, House Speaker Berri,
caretaker-PM Hariri, and General Joseph
Aoun, commanding officer of the Lebanese
Armed Forces.
November 25
> Pro-Hezbollah and Amal protesters violently
clash with anti-establishment protesters on
the Fouad Chehab bridge, known as “the ring”
and burn down their tents in Martyr’s Square.
December 6
> Businessman Samir Khatib withdraws his candidacy for PM just three days after he received public support from Caretaker PM Hariri and FM Bassil and one day
prior to a consulations to select a new PM
29
Executive 2019-2020
EXECUTIVE ROUNDTABLES
Introduction
By Thomas Schellen
A GATHERING OF MINDS
Executive’s roundtable initiative
When darkness and despair are the first
two options on the menu for your country, followed by austerity and depression as the plat
de jour proposals, nothing is more appropriate than to assemble a crowd of light seekers
and path finders. In this sense, it is a testimony
to the seriousness of the national economic,
financial, and even political situation of Lebanon—and to the immense reservoir of smart
and educated brains in the country—that proposals for this country’s betterment have been
proliferating not only in form of thawra pro30
tests and public sentiments on the street, but
also in more structured and tractable outpourings. The drafting of emergency economic rescue plans has become something of a national
sport in Beirut intellectual and business circles
as of late.
The Economic Roadmap 3.0 at the heart
of this issue of Executive is one such effort.
However, the Executive economic roadmap
project differs from other recent proposals in
that, compared to drafts that have entered into
circulation in the past two months, the magaexecutive-magazine.com
zine’s project has had a head start of over 18
months from its first written draft, and of exactly one year from publication of its version
1.0 in the 2018 Facts and Forecasts issue.
It is also not a monoculture effort in the
sense of representing just one economic school
or narrow way of thinking found in many proposals circulated in the fourth quarter of 2019.
This is a notable characteristic when one contemplates the current wave of ideologically
front-loaded socioeconomic propositions in
Lebanon and elsewhere, whether these approaches were voiced in a spirit of globally
financialized neoliberalism (that in the past
decade has been met with some acerbic assessments and not only among heterodox economists or austerity-regime critics in countries
like Greece) or a post-Keynesianism that has
been on the rise in some academic circles (and
most recently reflected in the developments of
labor-oriented political parties in countries like
the UK and Germany).
A COLLABORATIVE EFFORT
But the most important distinction of the
Executive Economic Roadmap in the Lebanese
context is rooted in the fact that this entire project is designed for and driven by participatory
passion and broad consultative collaboration.
It is not an exercise that has been undertaken
under any external financial dependency or in
response to a political commissioning. Moreover, it has not limited its horizon politically
or socioeconomically by exclusively pursuing inquiries with presumed elites and narrow
interest groups.
In that vein, when the need to draft version 3.0 became clear—version 2.0 was released
in February this year following consultations
across the country with civil society stakeholders on the original Economic Roadmap—given
the monumental economic and societal shifts
that we have witnessed in Lebanon in the final few months of 2019, Executive decided
to host a series of roundtable discussions in
mid-November.
These discussions, which in the end comprised six roundtables held over November 18 21 at Le Gray, in Downtown Beirut, covered the
following topics: corruption, entrepreneurship,
education, labor, women’s empowerment, access
to information, taxation, fiscal policy, and, argu-
ably most importantly, Lebanon’s current financial reality.
Executive’s team spent a stressful two
weeks trying to turn this last minute roundtable
initiative into a reality, contacting over 150 individuals across varied sectors and internally creating the topics and questions to be discussed at
each roundtable. In the end, around 50 individuals—economists, academics from private and
public institutions, entrepreneurs, and a diverse
range of civil society actors—came together to
discuss issues vital to the future of the Lebanese
political economy.
STARTING POINTS
These roundtable discussions were held under Chatham House rules—meaning that while
the individuals present at each roundtable are listed as contributors to our Economic Roadmap 3.0,
both the roadmap
and our coverage in
The most important
this issue of Executive refrain from
distinction of the Economic
attributing ideas or
Roadmap in the Lebanese
quotes to any indicontext is rooted in the fact
vidual persons.
that this entire project is
In conclusion of
the November 2019
designed for and driven by
roundtables, it can
participatory passion.
be stated with confidence that, although
a starting point for any possible journey toward
economic rescue and revival from the present
and still increasing misery has to be a competent and at least marginally accepted government, the way forward has its brightest outlook
in holding recurrent discussions among stakeholders in the economy. Technical knowledge is
required as a pillar in any such discussion—with
taxation, fiscal, monetary, and political economy
deliberations tending to the highest requirement of expertise—but based on the experience
of the six Executive roundtables (for summary
reports see pages 32 - 55) any future discussion
rounds would actually be most productive if
built on three pillars: the technical knowledge
pillar and two equally important non-technical
pillars, trust and commitment to Lebanon’s betterment being the first, and wide stakeholder diversity on many axes—meaning not just gender
balance, but also age and professional and life
experience—being the second.
31
Executive 2019-2020
EXECUTIVE ROUNDTABLES
Corruption
By Nabila Rahhal & Sarah Shaar
ROTTEN TO THE CORE
Corruption looms over all aspects of Lebanese life
The discussion brief provided in advance to
participants of the corruption roundtable invited
them to discuss legal initiatives to retrieve embezzled funds, the enhancement of penal codes,
and the adoption of laws for prosecuting incidents of corruption. Other discussion points
mentioned in the brief included the establishment of institutions to combat corruption and
audit public spending, awareness and education
on public service paradigms and appreciation for
effective administration, and finally a redesigning of services and digital access to government.
Executive has long recognized the importance of fighting corruption as an essential step
toward creating a strong economy for Lebanon.
Both previous versions of Executive’s Economic Roadmap (version 1.0 published in December
2018 and 2.0 published in February 2019) had
sections dedicated to combating corruption, as
does the reshaped Economic Roadmap 3.0 (see
Roadmap page 43) that has been updated to reflect the reality of Lebanon in the last quarter
of 2019, aided by the findings of Executive’s
roundtable initiative (see intro page 30).
The first of six roundtables held in mid-November, roundtable one on combating corruption was chosen as the opener on November 18,
given its urgency in the context of the ongoing
protests and the demands on the streets. Yet, over
the course of all six roundtables—on corruption,
on entrepreneurship, on social development, on
access to rights and information, on taxation and
fiscal policy, and on financial reality—corruption
was a topic that participants repeatedly cited as
one of the major roadblocks in the way of long
overdue and necessary reforms.
32
CHANGING SYSTEMS NOT SYMPTOMS
To open the discussion, participants were
asked whether institutional prevention, prosecution, or education and awareness building were
the best tool in combating corruption, and which
of the three were seen as a priority.
Almost all agreed the main issue lay beyond
the proposed question, and that before addressing prevention, prosecution, or awareness building, the first goal must be to change the political
system in its entirety—along with its leadership.
It was argued that corruption in Lebanon was
so flagrant because the political class failed to
consider the concept of the public good, and, as
a result, the citizen was never a pillar in policymaking. The consensus was that the way forward
in fighting corruption was to first create a new
government, independent of all current ruling
parties, which would, in turn, allow for an independent and empowered judiciary system that
could hold politicians to account by allowing for
the legislation and implementation of anti-corruption laws—as such, participants called for the
passage of laws that would grant independence
to the judiciary system, as well as an independent
security force that would prevent and control the
use of governmental scare tactics to stop prosecution against corruption. Access to information
was also brought to the table as one of the main
tools that would help with the fight against corexecutive-magazine.com
ruption, in particular when it came to attempts at
prosecution. (For more on access to information
see Roadmap page 44.)
Corruption was also seen as being a lubricant
of what was termed “the political economy of
sectarianism.” Under this paradigm, corruption
was not the sole purview of Lebanon’s political
elite as it was argued that it was in the best interest of the latter to allow corruption to trickle
down—thereby reinforcing sectarian identities
and moving the populace further from an ethos
of accountability.
LEADERSHIP IN THE FIGHT
AGAINST CORRUPTION
The following discussion point was the question of whether or not the fight against corruption should be led by politicians or civil society
members, and whether investing in e-government would benefit this fight. Most agreed on the
need for leadership in the fight against corruption and that it should come from independent
judicial bodies and through the establishment of
anti-corruption laws. There was, however, some
disagreement on whether leadership would come
from above or below. A common thread among
participants was that bottom-up approaches—
such as the establishment of new political parties
with a background in civil society and strengthening independent voices within syndicates and
orders—were a necessary long term approach to
combating corruption. In this vein, the victory
of independent candidate Melhem Khalaf in the
elections for the head of the Beirut Bar Association the day prior to this roundtable was seen by
participants as the first milestone in a long battle
against corruption.
Others, however, believed that change would
be imposed from the top down, and therefore,
before new political parties or leadership, it was
necessary to rehaul the system itself or risk replicating the same corrupt leaders. It was argued
that Lebanon’s sectarian constitution needed to
be changed to eliminate the idea that citizens
need their sects for protection and to start building the idea of protection coming from the government and a strong independent state.
Regarding e-governance, several participants
argued that we needed leaders who understood
modern technology and were able to put in
place a system that would help fight corruption
through eliminating the middle-men in bureau-
Participants were
almost unanimous
in their view that
Lebanon needed to fight
corruption—at any cost.
cratic procedures—who often ask for bribes—
and through making it easier to trace instances
of tax avoidance. However, it was also warned
that given the state of the internet in Lebanon,
migrating official paperwork online would be
a nightmare, and the priority would need to
be in fixing the internet infrastructure before
even thinking of putting time and effort into
e-governance.
Participants were asked to consider the fact
that a society that has corruption also incurs
some economic benefits from it. Executive
editors then asked for a simple yes/no response
from around the table on two questions: whether
they felt that the economic benefits of corruption in Lebanon would be bigger than the cost
of fighting it, and regardless, whether Lebanon
could afford to not fight corruption? While there
were some attempts to address the first question—several participants, while acknowledging
some economic benefits, argued that the cost of
opportunities lost was still greater—most responses singled out the second question, with
participants almost unanimous in their view that
33
Executive 2019-2020
EXECUTIVE ROUNDTABLES
Corruption
Lebanon needed to fight corruption—at any cost.
One dissenting voice was against such a fight under certain circumstances, arguing that in the
past, Lebanon has been
able to thrive under the
The battle against
stewardship of modercorruption is a long one, and ately corrupt leaders. At
it should be led by the new
this point, the moderageneration who have proven tor quoted South Korean
through this uprising to have development economist
Hyun Chang, author of
a clear understanding of
“Bad Samaritans,” who
argued that certain elewhat needs to be done.
ments of anti-corruption
were actually promoted
in order to keep developing economies from
gaining an advantage—what German economist
Frederich Lust termed kicking away the ladder
after you have used it. This view was well-received by the table.
34
AN ENVIRONMENT FOR CHANGE
The judiciary’s role in combating corruption
was the focus of the general debate. Participants
were split between the idea of working within
the current system to change it versus the need
to change the system altogether. One argument
for the former was that honest lawyers could
impact positive change despite a corrupt system. This argument was met with criticism
by others who again raised the argument that
corruption needed to be weeded out from the
system itself, and the first step toward that goal
would be an independent judiciary.
The value of a bottom-up approach was
again highlighted as the preferred mechanism
of achieving an independent judiciary within
a corrupt environment embedded in za’ims
and sectarian party leaders, with participants
calling for a series of small victories—such as
Khalaf ’s Beirut Bar Association win—within orders and syndicates that would lead to
change, giving the example of professional
orders in Tunisia as key to the success of the
revolution there.
The idea that there were two battles being waged—one against the sectarian system,
but also one within the system itself—was also
floated. Within each sect are people who are
fighting against their political parties, but also
those who want to keep the regime as is because
they benefit from it economically. Participants
concluded that the battle against corruption
was a long one, and that it should be led by the
new generation who have proven through this
uprising to have a clear understanding of what
needs to be done.
Two options were suggested when the question of how long the protests could last given the
current economy was asked by one of the participants: either the current government would
take action before the country goes bankrupt—
because it goes against their interests—or the
economic situation would severely deteriorate
further, which was argued could be a good thing
for the protests as it would tip the scale between
an uprising of middle income to lower-middle
income citizens to one with full participation of
lower income citizens—a full-on revolution.
Throughout, the tone of the roundtable was
one of grim determination to face the difficult
task of weeding out corruption through changing
the current system, yet hope for a better Lebanon
was evident in all the participants’ answers.
executive-magazine.com
35
Executive 2019-2020
EXECUTIVE ROUNDTABLES
Entrepreneurship
By Thomas Schellen
THE GLOVES ARE OFF
Hard new looks at the tech ecosystem and its entrepreneurial future
Before the October 2019 uprising, it was not
difficult to list unresolved questions and some
outright disappointments with the way that the
Lebanese entrepreneurship ecosystem had
been shaped in the past six years since Lebanon’s central bank, Banque du Liban (BDL), effectively launched it with publication of its Circular 331. In mid-November, amid the uprising,
the Executive roundtable on entrepreneurship
(the second in a series of six) witnessed most of
the same systemic and operational concerns as
had been debated in the ecosystem before, but
with two added accents: the money will never be
the same, and the discussion has gained honesty
and clarity.
In other words, the financial wells to nurture
the knowledge economy and the few Lebanese
startups with real economic promise need to be
re-drilled elsewhere and meet new specifications.
And everyone in entrepreneurship acceleration
is beyond wasting their time on idle ecosystem diplomacy or polite compliments to the old
331 system.
36
In years one to three of the entrepreneurship ecosystem there were already warning signs
of clientelistic allocations of projects and a lack
of competency in some of the ecosystem’s most
privileged cogs—its units that had been established with 100 percent BDL-guaranteed funding instead of the 75-percent guarantee of bank
investments into tech venture funds and startups.
Ecosystem insiders from early on also lamented about distortions that had crept in, due
to money inflows under 331 that had led to inflation in startup valuations and financing pitches of
more attractive looking business plans. Observers next noted very critically how the ecosystem’s
venture capital (VC) playing field was tilting increasingly away from super-high-risk startups
that needed finance the most, in favor of investments with risk profiles tending to the private equity corner.
Throughout the entire six-year period, as they
had been before the launch of 331, the existing
legal and judicial frameworks remained ill-suited
for facilitating an economic activity that needed
permission to fail fast and reboot. Before and after 331, some good projects never even got such
permission as they were killed by over-cautious
investment committees. In times of 331, however,
failures of ambitious startup projects happened,
but they were often not revealed in ways that
would allow the system’s players to learn all they
could from them. Transparency, from the ecosystem’s financial top at BDL to its operational bottom layer of VC funds, remained as alien as an
interstellar visitor.
In the latter part of the current period, from
2017 to 2019, the questionable wisdom of regulatory rules that limited 331-supported startups to
allocations of their funding in Lebanon was put
deeper into doubt when the financial reporting
requirements for these companies, under instructions from BDL, were tightened to the point of
being counterproductive.
executive-magazine.com
Still, despite these flaws and other questions,
such as the ability of the small ecosystem to create
enough jobs to make more than a tiny dent in the
long-standing employment malaise of a country
that produces an estimated five to 10 times more
college graduates than jobs, Executive’s reporters every year found positive aspects to point out
in the ecosystem—although in 2019 less so than
in previous years, and warranting far less exuberance than signaled by the foreword of an external
report that was published this summer (see box
on page 38).
ENTREPRENEURSHIP IN THE THAWRA AGE
Executive noted that internal and external
stakeholders—such as the promotional units attached to the system and international partners
with interests in its success—had embarked on
several mapping exercises from the third and
fourth year after the launch of 331. These exercises, however, tended to be afflicted by the difficulty to obtain data (which was limited due to the
system’s very brief existence) and even more so
by methodological imperfections or, all too often,
special interests.
The outlooks and assessments of the ecosystem stakeholders participating in the Executive roundtable on November 18 were decidedly
uncheerful in the short term, to the point of diagnosing the death of financing paradigms that had
been in force until now. According to participants,
absent visibility on the future of 331, uncertainty
on the ability to still tap into any of its hitherto
unused funds, and a strong expectation that the
funding environment would not be sustained
in the coming months were juxtaposed with the
understanding that entrepreneurship will be vital
for economic development and job creation after
the tremors in the political economy recede.
Noting that the ecosystem was nearing a
pivotal juncture with need to shift from the 331
funding paradigm to activating private funding already necessary before the uprising, participants concurred that this path forward is now
fully in the dark to the point of having to ask
how currently operating startups will stay alive
until the funding finds firmer ground. Entrepreneurial flight to other markets, meanwhile, is a
downside risk of the current situation, with regard to all tech startups, hardware startups, other
young companies, and even manufacturers that
have the ability to move out of Lebanon.
Emphasis on the upsides of the past six years
entailed the acknowledgement that 331 was responsible for assembling the entrepreneurially
high-powered minds that were gathering last
month at the Executive roundtable. Participants
agreed that the ecosystem’s emergence under the
331 initiative was also successful in creating a
new mindset and culture that is compliant with
the patterns that made tech entrepreneurship
succeed in those countries where it flourished,
beginning with a readiness to stand up after a
venture’s failure.
There was a divergence of views if the shrinkage of new startups applying for acceleration in
recent years was coupled with an increase in the
average quality of the applying ventures. Views
were also diverging on the funding environment,
as some participants
noted that private
Tech startups and
money at the end of
2019 has been exitespecially ventures in deep
ing the Lebanese
tech are more resilient
ecosystem,
while
due to their international
others pointed out
that investors with
migration opportunities.
new unwillingness
to expose themselves
to the banking sector’s deposit schemes have inquired with VCs and accelerators about investing
into entrepreneurship (traditionally not a prime
conduit for most investors due to the high risks
associated with startup investing).
Broad agreement among roundtable participants showed in their emphasizing the importance of overcoming Lebanon’s financial liquidity
problems and preserving banking sector sustenance, given that the ability to transact with local and international counterparties is just as vital
for entrepreneurial ventures as for all companies.
At the same time, participants noted that tech
startups and especially ventures in deep tech (focus on hard-to-copy innovations in technology
and science, e.g. artificial intelligence) are more
resilient due to their international migration opportunities when compared with non-tech or ecommerce entrepreneurship ventures that rely
strongly on non-tradable expertise such as local
market knowledge.
Experiences of the past few years cleared out
some hopes of Lebanon-focuses in tech entrepreneurship, first of all expectations of fintech
successes in the local market where negotiations
37
EXECUTIVE ROUNDTABLES
Executive 2019-2020
Entrepreneurship
between startups and a small group of banks as
potential clients, partners, or acquirers had, in
the past 18 months, come to naught. This in the
opinion of one accelerator program has ruled out
entire verticals as being viable for pursuit in Lebanon, most notably fintech, but also has shown that
ventures targeting small local e-commerce and eservices niches have very poor chances of success
in the Lebanese entrepreneurship ecosystem.
It was important for several of the stakeholders at the roundtable to highlight that systemic
limitations translate into better chances for startups whose team profiles reflect considerable expertise in the targeted field, emphasizing that
entrepreneurship is not a cure-all for career and
employment obstacles encountered by university
graduates. Entrepreneurship is also not the answer to business cycles, demographic mismatches,
or the dearth of employment opportunities in labor
markets in the Gulf that have previously attracted
Lebanese graduates. Moreover, while age is not a
barrier, young success stories are exceptions, and the
value of being trained in entrepreneurialism in tertiary or secondary education lies mainly in students’
improved ability to satisfy international employer
demand for entrepreneurial thinking, it was said.
Further limitations in the system seems to be
based on blind spots on the side of its agents and
proponents, and distrust and lack of information
on the side of entrepreneurs. According to this
UKLTH JOB CREATION CASE STUDY
A case study of the Circular 331 job creation impact of the UK
Lebanon Tech Hub (UKLTH) was published in mid-2019 by the
Institute for Strategy, Resilience & Security (ISRS), a unit at
University College, London. Citing the UKLTH’s primary mission
of employment generation with a “stated goal” of 25,000
jobs to be created through acceleration and entrepreneurship
programs by 2025, the study’s authors arrived at job creation
estimate by companies that were enrolled in UKLTH during the
aforementioned three years, (over 50 percent of them in 2015)
of 615 direct jobs, which were divided into 458 full-time and
157 part-time roles. For the impact in indirect job creation, the
number, under usage of a common multiplier, was estimated
at 1,344.
The job creation number was based on completed surveys
with 49 companies in the UKLTH program, but the authors
cautioned that 55 percent of the surveyed companies were
less than five years old. Also, all the surveys were conducted
at most three years after a company joined the program,
meaning that data points were few and inference of job
creation rates could not be reached with high confidence. “Our
study suggests that job creation is occurring, albeit at a pace
that reflects the combination of low expected initial growth
rate demonstrated by even highly successful e-commerce
companies and base-lined against the normal attrition rate of
companies,” the authors wrote and added, “This study should
serve as a starting point for annual reviews, from which
longitudinal data will serve to provide greater insight.”
While the professed topic of the study was the success rate in
terms of job creation, the ISRS paper also offered observations
and recommendations on the wider development of the
ecosystem and the role of Circular 331 in it. Corroborating
38
the perceptions that insiders to the ecosystem shared
with Executive at different times, the study’s general
recommendations included (1) to secure a long-term
duration of the program to allow for impacts to build,
(2) to ease domestic allocation requirements for funds
disbursed under Circular 331, (3) to critically evaluate the
flow rate of funds into startups and consider needs for seed
funding, and (4) to create a transparent data base that
elucidates the actual amounts disbursed into startups.
Further recommendations to BDL and UKLTH advocated for
improving outreach and access to funds for startups.
Although much more credible than earlier assessment
efforts of the ecosystem, a certain absence of intimate
diligence and familiarity with the entrepreneurship
ambience in Lebanon was notable from the cover image
of the ISRS document, which depicted the Jupiter Temple
in Baalbek (misidentified as Temple of Bacchus in its
masthead), which from local perspective makes about as
much sense as illustrating an academic paper on Silicon
Valley with a Redwood from Yosemite. The document
also opens with a foreword, signed by ISRS founder and
executive chairman, the Rt. Hon. Lord Reid of Cardowan. It
cheerfully (if from the perspective at end of 2019 ironically)
enthuses, “Lebanon’s unique combination as a geopolitical
nexus with an innately entrepreneurial culture, offers it
advantages in the new digital economy. In a period of what
we all surely hope will be long term stability, with patience
and persistence of all of the players involved, we can
expect to see this having huge long term positive impact
upon the recovery, renewal and transformation of
Lebanon’s economy.”
executive-magazine.com
view, many local entrepreneurs and hopefuls are
invisible to the ecosystem and prefer to stay away
from it because of their perceptions that the ecosystem is corrupted, the game rigged, and money
not accessible to them.
Some at the table suggested that startups
should avoid—at all costs—local banks and the
331 framework as hindrances on their development paths, adding that the ecosystem needs to
tap into funding sources that offer invested startups the right conditions. Further reiterated were
emphases on linkages to universities and boosts
of research and development as well as industries
and suitable exit platforms.
ECONOMIC VISION
To save the entrepreneurship ecosystem from
its operational dysfunctionalities that have been
building under the financial reign of Circular
331, capital guaranteed funding needs to be redirected to only the companies that need it, said
one strong recommendation. The entrepreneurship and knowledge economy ecosystem needs
to be rooted in a shared and clear vision of the
type of economy that Lebanon wants to have, the
recommendation also noted. Entrepreneurship
needs a purpose, and mindsets need to mature.
Instead of pursuing a startup as the hoped-for
ticket out of Lebanon, the mindset of the civil
revolution should be expressed in “national entrepreneurship” commitments, while at the same
time advocating for reforms of the regulatory
and legal frameworks.
According to participants, options for moving forward exist also in further activation of the
business angel networks created over recent years
and link them to diaspora investors who want to
engage with cogent entrepreneurship ideas in
Lebanon. International advisory councils can
also still be cultivated on the strengths of alumni
networks at universities like AUB, on condition
that the ecosystem is managed trustworthily.
It was noted at the table that immediate remedial action for the preservation of companies in portfolios began during the Q3 financial
crunch. This action included efforts of accelerators and funds to consolidate operational costs
and reduce burn rates of their hosted companies, improve coordination between startups and
mentors, and create clustering benefits by bringing portfolio companies together that operate in
the same industries.
Internationally connected funds and accelerator programs according to managers at the
Executive roundtable can further help startups
that are faced with bottlenecks in their transactions by helping them to establish bank accounts
and corporate partnerships outside of Lebanon,
find “soft landing spots,” incorporate in startupfriendly jurisdictions (e.g. Delaware), and navigate legal requirements that, under conditions of
global crises, can turn into economically deadly
cash flow chokers.
In their concluding
Some at the table
remarks,
participants
suggested that startups
reiterated that the initiative of Circular 331
should avoid at all
was the beginning of
costs local banks and
an experiment that can
the 331 framework as
bring many benefits to
hindrances on their
the Lebanese economy,
but that further develdevelopment paths.
opment of this entrepreneurial process requires
improvements of governance structures in this
country. Discussants agreed that entrepreneurial spirit is a mindset of problem solving and
pointed out that all entrepreneurial ventures
launched in Lebanon since the early 2000s had
found themselves confronted with one or other tough period soon after their launch. The
need for an entrepreneurial spirit and belief in
what one is doing was undisputed around the
table, as was the need to reign in uncertainty
and have a functional government.
39
Executive 2019-2020
EXECUTIVE ROUNDTABLES
Education
By Nabila Rahhal
NO STUDENT LEFT BEHIND
Reinventing Lebanese education for an uncertain future
The third discussion in Executive’s roundtable initiative was designed to cover a broad
selection of topics—regarding health, education, and labor—under the banner of social
development. Already a dense focus, the third
roundtable was further restrained when it became clear to Executive’s editors that plans
to carry out 10 roundtables over the course of
November 18 - 22 would be scuppered by two
events scheduled to take place that week—
the first, a rescheduled parliamentary session
that was intended to take place on November 19 amid intense opposition, and the second, Lebanon’s Independence Day celebrations
on November 22.
40
Folded into the discussion in the organizing
phase then was the impact of pollution on human development and—in a last minute move
due to the withdrawal of several participants,
the focus of a planned roundtable on poverty
alleviation was also folded into the mix. It was,
by anyone’s standards, an overloaded and ambitious discussion list. Prior to the roundtable,
which was held in the early afternoon of November 20, participants were encouraged to consider
the following topics: the organization and provision of healthcare, pensions, and education; the
development of labor statistics and labor markets; incentives for highly qualified graduates
and professionals to work in Lebanon; the need
executive-magazine.com
to re-evaluate the labor law; environmental protections, and the impact of pollution on human
development.
It was perhaps due to the overloading of this
roundtable, along with logistical challenges on
the day, that discussions instead were centered
on education and the labor market as related to
university graduates. Executive’s Economic
Roadmap, however, has sections dedicated to
developing strategies for improving education
(Roadmap page 22) and healthcare (Roadmap
page 25), a section on combating poverty (Roadmap page 40) and pollution (Roadmap page 47)
and a section on developing labor (Roadmap
page 58). This is born out of our belief that all
these elements of social development and capacity building are essential to move the economy—
and indeed the country—forward. When applicable, the roadmap has been amended to reflect
relevant points submitted by email or form by
both participants and the wider public.
THE QUALITY OF EDUCATION
The discussion began with a reflection on
education for the 21st century and how, in the
views of the moderator, students in Lebanon’s
schools were not being equipped with the tools
and skills they needed to excel in the jobs of the
future—which the moderator said required education in creativity, curiosity, collaboration, and
communication. Participants were then asked
for their reflections on these opening remarks.
Several of those at the roundtable believed
that, contrary to the views of the moderator,
private education in Lebanon was of high quality and had kept up with the changing needs of
the students to become more skill-based than
knowledge-based, with one citing various real
life examples found in their own work. Participants also noted that Lebanese students have
successfully taken the skills they have learned
at educational institutions in Lebanon and used
them to excel abroad. The issue lay, according to
one participant, in the inability of students to
apply these learned skills in Lebanon—something it was believed was in the process of being changed through youth participation in the
thawra (revolution).
There was, however, some agreement with
the moderator’s premise, with one participant
saying that time is running out and Lebanese
schools need to catch up fast by teaching the
skills needed for life in the 21st century, starting
with primary school children.
It was noted that quality assurance measures do not exist at the school level in Lebanon,
which creates an uneven landscape for students
upon entering higher education. To resolve this,
it was suggested that
there should be a regulaIt was noted that quality
tory body—made up of
assurance measures do
both public and private
schools and the Minnot exist at the school level
istry of Education and
in Lebanon, which creates
Higher Education—that
an uneven landscape for
should set a new educastudents upon entering
tional system, with indicators that would focus
higher education.
on teaching the skills
needed for the 21st century. This view was echoed by several participants. The responsibility of the state was seen in
terms of standardization, one participant argued
that there needed to be a program that would
be followed by all educational institutions in the
country that was decided upon at the state level.
The discussion then flowed on to public schools and the vital need for elevating the
quality of the education to produce more competitive graduates that would help rebuild Lebanon. A participant suggested that instead of the
government draining itself running the public
schools, its role should be to simply manage
them through inspections and ensuring they
adhere to certain standards. This could also be
achieved through a public-private partnership,
according to some participants.
THE MISMATCH BETWEEN EDUCATION
AND LABOR
The mismatch between education and the
labor market was also raised by those around
the table. One participant noted that an investment in quality education was very costly—estimating it to be $500,000 from pre-school to
university—and questioned how many years of
work in Lebanon it would take to recoup that
investment. This argument was furthered by
another participant who said that there needed
to be an understanding of the cost relative to
the returns in order to be table to address both.
While the costs of private education are known,
it was argued that data on the cost per student
to the state of public schooling or a degree from
41
Executive 2019-2020
EXECUTIVE ROUNDTABLES
Education
move Lebanon toward a productive economy
and open up the labor market with equal access
to all those qualified, participants argued.
There was also a consensus around the table
on the need to obtain data on labor market outcomes to guide strategies in education development. Several participants noted that in order
for the discussion to move forward and practical
measures to be agreed upon, it was necessary to
know the baseline from which we were starting
in order to determine key indicators of success.
Lack of data to assess the current situation and,
therefore, its needs was a theme raised throughout the roundtable initiative.
What was
needed was a
reorganization
of the political
system into
one that could
move Lebanon
toward a
productive
economy.
42
the Lebanese University was lacking. It was also
suggested that a study should be taken to survey
the incomes of students of private education institutions from the past five years to determine
the average income in relation to the upfront
cost of their education.
The discussion on the mismatch between
the skills of Lebanese graduates and their labor
opportunities continued, with one participant
noting that Lebanon suffers from a nonproductive economy whereby we have 30,000 graduates every year, and yet only create around 3,000
to 4,000 jobs, which are mostly in the public
sector and so are relatively low-skilled.
Beyond this, they continued, the mismatch
was impacted by two interlinked phenomena:
corruption and clientelism. It was argued that
in Lebanon it was immensely difficult to open
a business, complete official paperwork, or get
a good job—one for which you were qualified—
without wasta or being from the right sect or
political party. What was needed was a reorganization of the political system into one that could
HOPES & DREAMS
Beyond this, participants also questioned what
the goal of education was, with one quesstioning
whether they believed education was a means to an
end, or an end in itself, noting that there were other
outcomes to education beyond economic ones, including improving citizen engagement and civic education. It was noted that if a goal of education was to
produce engaged citizens, then students’ and youths’
participation in the thawra was evidence enough of
the benefits of the Lebanese education system—
though this idea was challenged by another participant who thought that civic education was lacking
in Lebanon.
Also raised by those at the table were questions on what problems were being addressed
through the discussion—was it reach of education, consistency across schools, the outcome
of education, or its cost? Defining the problem clearly was seen as a necessary first step to
tackling it.
Amid closing comments, it was asked that
the Ministry of Education and Higher Education apply existing regulations when it came to
the inspection of institutions of higher education, and especially when it came to issuing of
graduate degrees.
Another closing remark was a practical suggestion related to the strengthening of students’
skills versus their knowledge base, which recommended extracurricular activities between
private institutions of education and civil society
(charitable organizations for example) whereby
students could learn a variety of real life skills.
This roundtable highlighted the value all
participants placed on education as a vital building block for almost all pillars of a functioning
country.
executive-magazine.com
43
Executive 2019-2020
EXECUTIVE ROUNDTABLES
Access to rights & information
By Executive Editors
A BATTLE ON MANY FRONTS
People outclass politicians on women’s rights, expression rights, and responsibilities
Participants came from a range of backgrounds
and expertise, but while discussions on the day were
clearly delineated between the two broader topics,
with the moderator inviting those with backgrounds
on the subject at hand to take the lead, there was passionate and dynamic debate among all participants.
The fourth discussion in Executive’s roundtable
initiative was comprised of two broad topics: access to rights, with particular focus on the rights of
women, and access to information, with additional
focus on freedom of expression and media responsibility. Both topics were deserving of roundtables
in their own right and had initially been planned as
separate before timing constraints necessitated they
be brought together (see story page 40).
The fourth roundtable took place on November
20, with participants asked to consider the following
topics in advance: 1) The empowerment of women
and minorities, in corporations, in small and medium sized enterprises, in politics and public administrations, and in civil society organizations, 2) the
breaking of glass ceilings and challenging existing
social structures, 3) legal measures against domestic violence and exploitation, 4) implementing the
access to information law, 5) data ownership and
privacy, 6) the role and responsibility of media and
digital networks as countermeasures to fake news,
and 7) the dangers of surveillance and manipulation
in a digital society.
44
THE WOMEN’S REVOLUTION
To kickoff the roundtable, participants were
asked for their views on the role of the government
in ensuring gender equality and the legal measures
necessary to guarantee protection from violence and
discrimination. This led to two main considerations
around the table: the importance of culture versus
legislation when tackling equality issues, and the
importance of a unified personal status law under a
non-sectarinized system that would ensure equality
for women under the banner of civil rights for all.
There was a general consensus that the perception of women’s roles had shifted as a result of the
then-month long civil thawra (revolution), in which
women had taken prominent leadership roles,
organizing protest marches and creating human
chains on the frontlines of protests to act as a barricade between security forces and male protesters.
It was in this context that it was argued by one
participant that discussions about capacity building
and empowerment were no longer relevant—women were empowered and acting as leaders within the
protests—instead, what was lacking was access to
equal opportunities and resources, which was tied
by several participants into the need to ensure that
women have equal rights as citizens. Among the legal steps cited were laws that would grant women the
right to grant their children the Lebanese nationality,
further protections against sexual harassment, and
guarantees that women are treated equally in matters of inheritance.
There was debate around the table about the extent to which women’s equality could be legislated,
given that many of the issues being discussed were
linked to cultural and social norms. To two particiexecutive-magazine.com
pants, achieving gender equality did not necessarily
need to be tackled through legislation. Instead, since
gender inequality was a cultural issue in their perception, it could be countered through education
and awareness raising for society to accept women
as equals, especially when it comes to equal pay.
Financial independence for women, they argued,
would go even further than legislation in achieving
gender equality.
Others linked the idea of addressing cultural issues back to the thawra by noting that women suffered most under a political system that was tied to
patriarchal norms, but argued that society and Lebanese culture at large was supportive of equal rights
for women—seen through women’s leadership and
participation in the protests—and as such, the people were more advanced than the political elite, and
so changing the political system would be the entry
point to securing equality for women.
Participants had differing views over the roles of
quotas in ensuring female participation in the government and in boardrooms. Several participants
believed that quotas were necessary to ensure women were granted opportunities that society would
otherwise not accept, another raised concerns over
inequality of representation in rural or impoverished
areas. Another disagreed entirely with the premise
that there was gender inequality in terms of high
ranking positions in Lebanon, citing female ministers and department heads within ministries—this
was met with significant opposition from around the
table, with other participants noting that there were
few female representatives within syndicates or the
judiciary, and that women in prominent roles—such
as activists or journalists—were often subject to online harassment and bullying tactics.
Amid disagreements among those present,
one participant made a note that the perspectives
of those around the table—educated women (and
men) in high ranking positions—may differ from
those of women from rural or impoverished areas
in which rights that were being taken for granted by
those present may not exist in practice. This, it was
argued, was why legislation on the national level was
necessary, particularly revisions of laws on personal
status, nationality, and minimum age for marriage.
Other participants called for the bigger picture
to be addressed, arguing that without the fall of the
current sectarian system, it would not be possible
to achieve progress in women’s rights. It was argued
that there needed to be a direct link between the
state and the citizen in order to ensure citizen’s rights
outside of the clientelistic sectarianism in which sectarian leaders act as middlemen. What is needed,
argued one participant, was a direct link between
citizens and a state that could provide them with social welfare, subsidized education, housing plans not
based on loans, and employment opportunities, and
that, by removing the middlemen, women would be
able to claim more independence. As such, one participant called for a unified personal status law for all
citizens so that no one would need to go to their sect
to obtain their rights.
While there was pasIt was argued that
sionate
disagreement
without
the fall of the
among participants at the
sectarian system, it would
table, debate was generally
carried out in a respectful
not be possible to achieve
and constructive manprogress on women’s rights.
ner—with one notable
exception. On the issue of
nationality rights for women, in particular women
being able to pass on Lebanese citizenship to children with Palestinian or Syrian hertiage, there were
strong disagreements between participants. When
some participants argued that this issue was not
related to gender discrimination, this was met with
strong opposition from another participant who
noted that while these points of view were common,
they were based on a false premise. The participant
went on to reference research undertaken by their
organisation on the impact of the nationality law on
women and their foreign spouses and children, and
the way in which it impacts their access to education,
healthcare, and residency. More specifically, it was
noted that the numbers often cited by parliamentarians—that giving women nationality rights would
tip the demographic balance by granting Lebanese
nationality to some 100,000 - 200,000 Palestenians
and Syrians—were inaccurate and amounted to little
more than fear mongering.
The participant went on to explain that according to General Security, 21,796 non-citizen children
and spouses of Lebanese women obtained legal residency in 2017. But a 2016 census of Palestinians in
Lebanon found just 3,707 cases of a Palestinian head
of household married to a spouse of a different nationality, and a 2009 United Nations Development
Program-backed study found that there were only
18,000 marriages between Lebanese women and
foreigners in Lebanon between 1995 and 2008. The
participant noted that while these figures may not
be 100 percent accurate, they are indicative that the
numbers cited in political discourse were—even at
45
Executive 2019-2020
EXECUTIVE ROUNDTABLES
Access to rights & information
the low end—massively inflated. When presenting
these numbers, the participant was frequently shouted down by others at the table who were in disagreement; the moderator was forced to intervene.
In terms of practical steps moving forward,
there was a three-part call by one participant for the
government to first understand and ensure they are
aligned with the obligations they were undertaking
when signing international treaties such as the Convention on the Elimination of All Forms of Discrimination Against Women (CEDAW). The second call
was for these commitments to be translated into a
strategy on the empowerment of women, complete
with a budget and a set of indicators, and the third
call was for equality for all on the basis of their citizenship alone. This was positively received by the
other participants.
DIFFERING INTERPRETATIONS
The focus of the roundtable then shifted to discussions on Law 28 (2017) on access to information
and the difficulties of implementing it, as well as the
broader issue of data collection in Lebanon.
Two participants discussed the access to information law in detail, explaining that there were two
schools of interpretation when it came to its implementation: for NGOs and some administrations
the law was being applied, but for many other bodies, the lack of implementation decrees and AntiCorruption Commission (ACC) was being used as
a pretext to ignore the law.
One of the participants pointed to the mixed
success their organization had in trying to obtain
data using the access to information law. In their
first attempt last year, only 34 out of 133 administrations replied. Of those, only 18 had appointed an
information officer—15 on request of the organization—and many were unaware the law existed. A
46
second report, released in September 2019, had more
success with 68 out of the 133 contacted admininstations responding, yet, of those, only 33 complied with
requests to view their fiscal budgets. Many administrations cited the lack of implementation degree as
the reason why they were not complying with the law,
with only some reversing this decision when shown
documents from the Committee of Legislation and
Consultation at the Ministry of Justice that stated the
law was applicable without implementation decrees.
According to the participant, the Office of the Presidency of the Council of Ministers even went so far as
to say that those who had provided information were
in violation of the law.
According to one of these participants, the
parliamentary session that had been due to take
place the day prior included several amendments
that would have guaranteed the law should be implemented regardless of further decrees and the
formation of the ACC, and would have increased
its efficiency. This, they said, was a required step in
the short term. In the short to long term, the new
government, when formed, needed to issue implementation decrees to help facilitate the law and
make it more efficient. Here it was noted by both
participants that the current draft implementation
decrees are actually problematic, as they restrict
the use of the law to stakeholders with interest in
the information, despite this being in violation of
international agreements as well as the Lebanese
Constitution and the access to information law itself. It was noted that in the course of trying to seek
information through the law a common question
was, “Who are you, why are you asking?”
A further consideration, one deemed easy in the
short term, was for all administrations to appoint an
information officer. Moving forward, a practical and
necessary step, according to one participant, was to
pass the law on combating corruption in the public
sector and to form the ACC. It was noted that the
ACC had been passed by Parliament in July 2019,
but sent back with around 12 objections by President Aoun. Of these objections or remarks, there
was concern over the issue of whether judicial appointments to the ACC should be elected, with the
participant arguing for the latter to increase judicial
independence. It was further noted that the ACC
law needs to be passed as its holdup has prevented
effective full implementation of four other laws: Law
28 (2017) on access to information, Law 83 (2018)
on whistleblower protection, Law 84 (2018) on
transparency in oil and gas transparency, and Law
154 (2009) against illicit enrichment.
executive-magazine.com
Digitization of data and the creation of an eplatform/referral system for active disclosures necessitated by the law—such as budgets—was under
process and needed to be continued, it was argued.
In the long term, several participants noted that
a lot of work needs to be done on awareness raising
among citizens on their rights regarding transparency and accountability as well as capacity building
for civil servants. There was, however, some disagreement on this from one participant who argued
that the thawra had shown that citizens were engaged and aware of their rights.
THE DEARTH OF DATA
The lack of available data was an issue raised
throughout the roundtable initiative, though none
more so than in the discussion on access to information. When debating the issues with data collection and subsequent digitalization, one participant
noted that the problem was much worse than realized. There was, according to this participant,
no good classification of data, no standardization
between administrations, integrity issues with the
data itself, and duplicate data across various government agencies. Beyond that, it was argued, civil
servants need to be educated on their responsibilities, and there needed to be agreement on what data
should be collected and what can be disseminated.
A practical step, according to this participant,
would be to start digitizing services that would not
change, such as healthcare services.
Other participants noted that if the initial data
was incorrect, this would not be solved by digitalization. Further dimensions considered by participants regarding data included the need for trust
between citizens and public administrations, political considerations—such as the Central Administration of Statistics allegedly being kept away from
the refugee file as politicians did not want accurate
data—and that digitization was yesterdays’ news
and without it Lebanon would lack behind on the
world stage.
CRACKDOWN ON FREE SPEECH
During a discussion on freedom of expression,
it was argued that the perception that from 2015 to
the onset of the thawra freedoms had been under
increasing attack was borne from data. One participant noted that attempts to quantify the number of
defamation/insult cases in that period using the access to information law proved to be an interesting
experience, and their organization had opted to get
numbers from the Cyber Crimes Bureau (CCB)—
which most cases were referred to—to get a sense
of the scale. Between 2015 and May 2019, the CCB
had recorded 3,559 defamation cases—only 60 - 80
of which had made it into media reports.
The participant went on to argue that these
cases—an increase of 325 percent from 2015 to
2018—were problematic for a number of reasons:
firstly, they argued, the law itself was an issue as by
international standards, peaceful speech should
not be criminalized, and so, defamation cases
should be tried as civil not criminal cases; secondly, that truth was not a defense under Lebanese law; and thirdly, that public officials were
offered greater protections
under current defamation
It was noted that
laws when this was against
the public interest. Beyond
support for truly
that, it was alleged that
independent media
there were abusive pracwas necessary.
tices in place, including
threats or acts of violence,
summons without giving cause, and people
being pressured to sign pledges with no legal
bearing. It was suggested that public persecutors, who have control over these security investigations should make very clear the need to
abide by the code of criminal investigation. The
participant further suggested that there should
be training for judges to eliminate alleged bias
in proceedings.
COUNTERING RUMORS AMID REVOLT
In the last minutes of the roundtable, the
discussion moved to the media’s role in countering the rapid dissemination of propaganda, particularly in times such as the ongoing uprising
in Lebanon.
One participant said that in Lebanon there was
no independent media; 12 political families own
the media in Lebanon and so, they argued, the national media is little more than media arms from
political parties. In this context, it was noted that
support for truly independent media was necessary.
Participants also argued that due to the revolution media was playing a huge role now, yet lacked
in-depth journalism and analysis. There was also
criticism of public administrations for not providing information and so allowing rumors to spread.
Again, the lack of data was raised as a barrier to
analysis by the media. There was, however, some
hopes raised by participants that the civil thawra
and citizen journalism from it could play its role in
creating an independent media in Lebanon.
47
Executive 2019-2020
EXECUTIVE ROUNDTABLES
Taxation
By Thomas Schellen
IN ABSENCE OF FISCAL POLICY
The search for a fairer, more redistributive tax system
The roundtable covered in this piece was
dedicated to economic angles of fiscal reform
and taxation. Thus, in the context of Executive’s
mission and coverage focuses, both it and the accompaning sixth roundtable on financial reality (see
article page 52) were a hardcore expression of this
magazine’s existential paradigm to cover the Lebanese economy to the best of its ability. Both roundtables were conducted on November 21 under sole
content authority of Executive editors.
The discussion brief for the fifth roundtable
stipulated that participants would be discussing
ways to shift to redistributive taxation structures, to
identify opportunities to tax economic rents with no
detrimental impacts on overall economic participation, to improve tax collection in fair and equitable
ways, and to introduce new transparency to fiscal
and tax institutions.
ON TAXATION AND FISCAL REFORM
The roundtable on the implementation of
the fiscal reforms and taxation entailed a pivot
away from highly technical tax questions, such
48
as requests for proposals on effective and ethical
taxation of economic rents or the implementation
of schemes to enable economic transfers from
highly developed economic metropolises to disadvantaged communities. Questions at the table
re-focused on participants’ recommendations for
fiscal reform measures, on the best and most fair
approach to the taxation of banks, and on ways
to migrate toward more efficient tax collection, to
increase the ability of productive sectors to comply with international market requirements, and
to achieve more formality in the economy.
As a baseline of the fiscal reforms and taxation
roundtable, participants had zero disagreements
in saying that Lebanon in recent years—and in
context of 2019—has shown no evidence of any
fiscal policy, but that fiscal actions have been
comprised wholly of fiscal measures without any
discernible vision or strategy. Haphazard measures in recent years were aimed at increasing state
revenues through tax law revisions (e.g. 2017),
but were implemented without necessary impact
assessments. Equally undisputed were comments
executive-magazine.com
that taxation policies—which over years were only
adjusted in minor ways, even when the national
value-added taxation program was enacted from
2002—needed to pivot from indirect and regressive
to direct and progressive. A shift from indirect to direct taxation would favor social equality.
However, the organization of society toward
being more inclusive and fair would also have to
come with behavioral reforms of the economic
system whose current structure supports rent seeking, wealth-derived gains, and the concentration of
wealth under strong protection for rich individuals.
Strongly criticized were taxation decisions in
the 2010s that were described as reallocations of
market-generated incomes to the “black hole” of
an increasingly unproductive public sector. Less
than universally agreed, however, were the perspectives which participants espoused in assessing existing realities of poverty prevalence versus
the concentration of wealth in the country, the
most appropriate ways to gauge banking performance and profit rates achieved in the sector, and
productive paths for ethical and efficient taxation
of incomes and economic rents.
Arguments that private concentration of deposits in bank accounts was extremely high were
challenged with reference to Lebanon’s banking secrecy, which was argued would not facilitate collection of such information for the entire
banking sector. Disagreement over the right approach to taxing bank profits—juxtaposing nominal profit levels of Lebanese banks in recent years
with the return on equity ratios highlighted by
bank economists—also remained very noticeable.
Advocacy for the general removal of banking
secrecy in the Lebanese system was voiced as the
path toward income transparency and removal of
tax evasion incentives for individuals in the liberal professions who engage in diverse economic
activities and hold several bank accounts, but do
not declare all their incomes. Also proposed was to
increase pressure to implement tax compliance of
companies that operate on the border of informality by not paying their dues, ranging from VAT and
corporate income taxes to national social security
fund contributions for all their employees. It was
argued that the enhancement of governance in tax
collection and fight against tax avoidance should
be achieved before attempting a discussion on the
economic order of Lebanon, including questions
over the desirability of a welfare state or an economy with a very large public sector.
With regard to the question of the economic
system and the course of Lebanon, it was argued
that a very big problem in the country existed in
having governments but not an efficient state.
The apparent dwindling of the Lebanese middle
class in the past 30 years and the continued influence of militia structures and militia persons
who had been able to transition into political
roles were pointed to as other obstacles in need
of remedying in order to achieve a more effective
state. Furthermore, voices around the table drew
attention to the need of achieving a balance of
private sector growth and implementation of laws
by an empowered state. A participant argued that
unfettered activities of the central bank and commercial banks had led the country to the difficult
place that it found itself in this year.
Attesting to the necessity of looking beyond
taxation when seeking to address social inequality
and poverty prevalence in Lebanon, several participants emphasized the importance of social expenditures from quality
spending on education
It was depicted as prudent
and health to liberatto recognize that personal and
ing the poor from cost
corporate incomes in Lebanon
burdens and improving
the labor market. It was
are taxed rather mildly in
further emphasized by
international comparison.
participants that young
companies with growth
and job creation capacities are faced with taxes and
levies that do not make sense and, suffering greatly
under indirect taxation burdens, are in want of government policies and incentives that compensate
them for their contributions to economic opportunities and keep them in Lebanon.
TOWARD INCLUSIVENESS
Besides acknowledging the problems of
persistently regressive taxation and the need to
change these practices, it was depicted as prudent
to recognize that personal and corporate incomes
in Lebanon are taxed rather mildly in international comparison. The major challenge in the
fiscal constitution from this perspective are problems on the other side of the fiscal balance sheet,
such as irrational hiring in the public sector, indiscriminate expenditure, haphazard spending,
and other wasteful deficit drivers. Participants
argued that increasing expenditures and heightening deficits led to higher interest rates that
blocked economic growth, on top of which the
49
Executive 2019-2020
EXECUTIVE ROUNDTABLES
Taxation
long existing exchange rate peg and low productivity made Lebanon noncompetitive. This malaise was further exacerbated by absence of business friendly regulations, weakening in the Gulf
markets, the conflict in Syria, and the Lebanese
government shift to borrow in US dollars. All this
was contrasted with governmental economic rescue propositions that were badly insufficient.
It was acknowledged around the table that tax
policies need to incorporate elements of societal guidance and be grounded in a national economic vision
on what sectors in the economy should be promoted
and how spending of fiscal revenues should be targeted. In the case of Lebanon, participants noted that
this translates into a question on how to move from
an extractive economic model to an inclusive one.
A resurging factor of irritation and divergence
in the discussion arose from the—universally acknowledged—lack of reliable data on the Lebanese
economy and the actual performance of its economic agents. Insistence on the deficiency of hard data
in areas ranging from poverty to income concentrations was juxtaposed with passionate emphasis of
visual evidence of high poverty levels, for example.
There were divergent views on whether wealth in
Lebanon is highly concentrated or not to the extents
believed by some. In the perception of Executive,
this discussion once again pointed to the utter im-
There were divergent views
on whether wealth in Lebanon is
highly concentrated or not to the
extents believed by some.
50
portance of initiating a national socioeconomic
census under any government seeking to design
policies that can achieve socially meaningful targets.
REFORMING TAXATION
Concrete measures in the area of taxation
needed to involve closing tax loopholes by reforming the frameworks under which offshore
companies operate, unifying income tax, and
simplifying tax codes, it was suggested. Newly anchoring the system on progressive taxation was a
priority need in the perception of numerous participants. Other areas of note from a taxation perspective according to participants were succession taxes and the need to make the entire tax and
fiscal system more transparent to tax payers. In
this and other regards, digitization and introduction of e-government functionalities was viewed
by participants as an enabler for improvement.
Application of essential rules on tax equity—
such as taxing personal or corporate incomes
equally and protecting tax payers from arbitrary
changes in their tax burdens—was emphasized
in the discussion, as was the importance of taxing
productive sectors and banks on basis of principles
of equality and fairness. Emphases for fiscal development were reiterated as restructuring of expenditures and elimination of wasteful practices in the
public sector. The fiscal mission was described as
a combination of moving from waste to productivity in the public sector, reducing the public sector, putting public finances in order by fighting tax
evasion, increasing transparency, and instituting
internal auditing as a constituent factor in public
and private sector economies.
The majority of participants did not think that
experiments with new public sector entities aimed
at better management of economic cycles, such as
a publicly-owned investment bank, would be applicable given Lebanon’s over-politicization of political
economy institutions. Issues such as the idea of a
digital currency under central bank management,
as discussed in some countries, were not perceived
as being of current importance for Lebanon.
In evaluation of the overall fiscal and taxation
discussion, and in the conclusion of roundtable
five, participants stated that the public finance
problem was also a political problem that originated from the unchecked existence of conflict of
interest issues engulfing political actors and that,
likewise, the determination of a national government was indispensable for devising practicable
solutions in the fiscal and taxation space.
executive-magazine.com
51
Executive 2019-2020
EXECUTIVE ROUNDTABLES
Financial reality
By Thomas Schellen
SEEKING WISDOMS OF ETHICAL CROWDS
Transition scenarios and their bleak alternatives
had to be changed and interactions with international markets developed, and if resource exploitation could contribute to the rescue of the economy.
For the roundtable on financial reality, monetary needs, and trade and energy issues, the
discussion brief invited debate on the role and
responsibility of the central bank, the banking
sector, the insurance sector, and capital markets
in Lebanon, coupled with exploring the country’s
circumstances with regard to trade and remittances, its interdependency on international financial markets, the prospects for international
participation in infrastructure investing, and the
national impact of global financialization. For the
initial question, Executive editors asked if Lebanon has its own capacity to devise an economic plan
for near, medium, and long-term economic rescue
and progress.
In the realization of the financial reality roundtable, this initial query was expanded by the moderator into four questions: namely if an economic
plan could still be viable in light of the ongoing uprising and economic shocks experienced since midOctober 2019, what the best course of action was
in regard to the monetary course and international
financial obligations of Lebanon, how trade patterns
52
TOWARD LIGHT OR DARK
The discussion of Lebanon’s financial reality
was opened with the juxtaposition of two extreme
scenarios in the near term. As the scenarios were
first painted and later reviewed around the table, a
distinction was made between a “white” scenario
and a “black” scenario, the likelihood for which was
5 percent for the former and 95 percent for the latter, according to the instigator of the comparison.
The white scenario would unfold via the designation of a government that gains popular consent, and then would progress by recovering embezzled public funds, gaining active support from
friendly governments and international agencies,
and implementing investments laid out at CEDRE—and would receive a positive economic
shock via a sizable offshore oil/gas discovery. Under a multi-year perspective, this scenario would
incur both public-private partnerships (PPP)
and private investments.
By stark contrast, the black scenario, with a
horizon of unfolding on very short time frames
from a few weeks to three months in the opinions
of several roundtable participants, would see many
families without living incomes due to full or significant partial failures in receiving their salaries,
causing anger, despair, and violent conflicts on the
streets of Lebanon. Bank depositors would add to
the violent crowds because of the loss of their deposits from abysmally dysfunctional banks.
Under this prediction of maximum socioeconomic gloom, import capacities would be extinguished, and the banking system in near entirety
would implode, resulting in an accelerated scenario of social unrest that would further be reflected in the organization of communal fiefdoms by
Hezbollah, while in other parts of Lebanon only a
handful of private investors with access to external
executive-magazine.com
banking services would be able to enact financial
activities. A parallel system of finance would emerge
and recovery from this systemic implosion of the
Lebanese financial system would require 10 years.
Debating the probability of such a scenario,
participants noted that other possible pathways
would not involve a collapse of the banking system.
Confidence having admittedly vanished from the
system, the removal of ultra-dollarization, along
with impositions of capital controls and eventually
the reduction of imports related to foreign exchange
controls, and action to overcome tax evasion and
waste in public expenditure could function toward
Lebanon’s stabilization. However, under such views,
the rapid designation of a government was the precondition for a benign scenario in Lebanon’s financial reality over the coming months and improving
credibility scores with the population and international partners would be a key factor.
Another participant concurred that, at the time
of the discussion, no confidence existed in the Lebanese system while the central bank was unable to
meet financial needs for importation and banks were
experiencing runs on deposits. Restoration of confidence was only possible on basis of a government’s
appointment, proceeding from which the only path
to recovery would exist through involvement of the
International Monetary Fund (IMF) that would enter
an agreement with Lebanon and also act as catalyst
for mobilizing international support.
The Lebanese economy in this perspective
should first embark on simple reform measures,
such as filling the void at regulatory authorities in
telecommunications and civil aviation, increasing
electricity tariffs, taking one-two steps toward increasing taxes and social safety provisions for the
poor, attempting to reign in the external imbalance
in payments and trade, and doing what the IMF
would do—even if for political reasons the direct
help of the IMF was not sought. Proposals to restructure the economy from a rentier to a productive one with increasing agricultural and industrial
exports were presented in this context (a concept
further spelled out in the position paper by economist Marwan Mikhael, first published in full
on Executive’s website).
Moving further into the discussion of realities
and possible solution ideas, other stakeholders at
the table argued that there are too many variables
involved in the unfolding of the current crisis for
planning efforts to be adequate at this time but expressed that things will be messy, noting that many
measures should have been embarked on years
ago, such as a move by the central bank to reinstitute a crawling peg of the Lebanese lira instead of
applying the policy of a fixed exchange rate. Recent
decisions on monetary action in the attempt at securing imports such as fuel and medicines were,
however, sharply criticized. Under the perception
that a new 15-year cycle was about to unfold in the
story of Lebanon, the sixth of its kind, there was,
however, hope from participants that the coming
cycle would induce a better Lebanon.
TRADING IN COMPLEXITY
With a view to trade and the guidance of imports and exports, it was noted that two aspects of
the negative trade balance involve the shrinking
of exports over the past 20 years as well widening
of the trade deficit due to increasing imports. The
export capable sectors of the Lebanese economy
over many years have suffered from deficient
infrastructures and also lacked governmental
interventions to make
producers more comThe rapid designation
petitive and increase
of a government was the
exports. Private sector
actors in credit insurprecondition for a benign
ance have a mission to
scenario in Lebanon’s financial
support companies in
reality over the coming months.
building abilities to increase sales and export,
but the government’s role in this context cannot
be fully substituted through private initiatives,
it was argued. That companies in Lebanon need
more support in becoming export-ready, was
raised as part of these discussions.
From the perspective of Lebanese industry, it
was noted that a quick increase in export volumes
was not likely to be achievable for local companies, given their high comparative costs relative
to regional peers, and the fact that they were not
commodity exporters but rather had their main
potential in exports of complex products. In this
regard, the complexity of the Lebanese economy
was more on par with European countries than
with regional neighbors and emerging markets
producers. While this was a very positive factor offering economic gain potentials in the long term
under international collaboration scenarios with
higher cost developed economies, the development of such potentials required time. Therefore,
a shorter term adjustment of trade imbalances of
Lebanon was more readily achievable by import
53
Executive 2019-2020
EXECUTIVE ROUNDTABLES
Financial reality
reductions and substitution with locally produced
goods, it was argued.
On the financial side, proposals from the industry stakeholders entail conversion of bank
deposits held by investors. Two special vehicles or
funds were on the drawing boards in this regard, the
first was a mechanism for industrial sector investments and lending that entails capital guarantees
from the Lebanese central bank and also at the international level. The triangular process envisioned by
industrialists would ease interest costs of industrial
loans, remove part of deposit interest burdens from
the books of banks as well as liberate funds that have
been locked under provisioning needs, and provide
long term benefits to investors who cannot access
their deposits in absence of economic sanity.
A similar but somewhat simpler mechanism
would, in the view of industrialists, also be enacted
in the sphere of unsold property stock in Lebanon.
It was noted that the envisioning of
such scenarios would have room
The rise of social
for the activation of special-purpose banks in the country. Pointing
tensions and jobout that many banks have exhibited
loss related unrest
substandard behavior and unsatin combination with
isfactory communication perforinvestment losses
mance as the Lebanese economic
crisis began to unfold, industry
would loom in the first
representatives at the financial realhalf of 2020.
ity roundtable agreed nonetheless
that it would not be feasible in the
short term to depart from Lebanon’s monetary
policy patterns of a peg to the US dollar.
Yet another very noteworthy scenario elaboration at the sixth roundtable was presented with a
baseline assumption of 80 percent agreement with
the “black” scenario presented at the start of the discussion. This scenario, however, argued that the time
window for embarking on a determined financial
rescue operation would not close within weeks, but
rather a few months. Under this variant of “black,”
the rise of social tensions and job-loss related unrest
in combination with investment losses would loom
in the first half of 2020.
Attempts to avert this chain of events would have
to include an, albeit costly, defense of the dollar peg
because failure to do so would translate into a factor
four exchange value deterioration of the lira. Currency support under this recipe would have to be
maintained until an organic restabilization of the lira
was achieved at, or near levels of, the current official
exchange rate, from which point on unpegging of the
currency could be implemented.
54
This scenario also assumed the need to have a
viable departure point in an agreement on a government and a negotiated political settlement. In pursuing a rapid agreement on government formation,
however, the scenario assumed that a significant
share of governmental power would fall to the opposition, which would henceforth restrict the ability
of establishment politicians to act with previously
existing impunity. As such, incorporation of opposition in governmental functions would work toward
gradual transition to an entirely new government.
LESSONS LEARNED
Part of this transition process would be the activation and continuation of economic councils within
the framework of the uprising. Such agora transparency, it was argued, would prevent politicians from
maintaining corrupt patterns. At the same time, recovery of embezzled funds/elimination of financial
gaps in the political economy of Lebanon (in electricity, telecommunications, customs, and other realms)
would work for reestablishing a rule-based and compliant political economy system. As further part of
the starting setup, it was argued that authority over
the Lebanese streets must be restored to the point of
not allowing protesters to lock down economic activity in the country.
Efforts to recover looted funds would have to
follow but were likely to be of limited effect under
this scenario’s assumptions, the reason being that
most of the funds that were diverted from serving
public interests were “stolen in lawful ways,” i.e. under imposition of legislation that was permissive of
politicians’ self-interests. However, once a new government has reclaimed partial trust of citizens and
partial trust of the old political stakeholders, it would
become possible to approach the international community with a request to disburse a first tranche of
money allocated under the CEDRE framework and
Lebanon could then begin to implement a reexamined and eventually improved Lebanon Economic
Vision, the plan devised in 2018 by the McKinsey
consultancy firm.
Even as the proponent of this scenario noted that reliance on CEDRE lending would not
have been advisable just one year ago, the participant pointed out that such inflows would be
needed under the rescue scenario in addition
to inflows from Lebanese diaspora sources that
would be contingent upon implementation of
a good government.
Despite the need for external funding, a pivot of
the system away from seeking to attract deposits and
executive-magazine.com
financial inflows into an economy that prioritizes
venturing into industrial and agricultural production activities was embedded in this rescue scenario.
The argument in this regard was that the country
must be equipped with an economic policy by the
government and a monetary policy by the central
bank. The central bank would decrease interest rates
in 2020 (note: a circular to that extent was released
a few days after) and stepwise governmental easing
of tax burdens on companies then would support
industry and agriculture in conjunction with the implementation of an inter-ministerial initiative labor
market initiative. The former needed to entail guidance for youth into constructive employment. Industrial and economic growth would subsequently
cause confidence in the Lebanese economy and currency to improve.
NO SAVIOR IN OIL
Included within the financial reality theme of
the sixth roundtable were perspectives on the energy sector, with an opening comment that painting Lebanese oil exploration as the solution to the
country’s economic problems was not reflective of
reality. Oil cannot save a country, it was emphasized. The ongoing process of development of regional infrastructures without current Lebanese
participation was noted, as well as the need for a
clear vision on the domestic or export usage of an
eventual discovery.
However, it was further emphasized that the
chances of a commercially usable discovery at the
speculated size of 1.7 trillion cubic feet gas was at 25
percent and that revenues from exploitation could
not be expected before eight to nine years. In the intermediate time, no more than necessary expenditure was warranted, for example in tendering for a
single floating storage regasification unit (FSRU)
that would be employed until a gas discovery transitions into commercial use. Besides the need to allocate funding to an FSRU unit, challenges for implementing new energy infrastructures for natural gas
usage in electricity generation were the need for civil
works and the acquisition of the liquefied gas. A review and revision of energy exploitation policy and
eventual gas purchasing contracts was also required.
With regard to electricity provision by the state
utility Electricité du Liban (EDL), better planning
and tariff setting were required in order to tackle
unsustainable electricity subsidies. However, current plans would increase the price of electricity for
end uses and need examination, otherwise the risk
of a vicious cost cycle at levels of end users exists.
From an industrialist’s perspective, a participant
added that some solutions could be implemented
immediately, due to economic opportunities—such
as decentralization of electricity production—created by cost differentials. Also it could be advantageous for a company to have reliable electricity supply from EDL, even if prices are hiked significantly,
because reliable supply would allow manufacturing
plants to avoid allocating three electricity budgets:
one for state electricity, one for private generation,
and a third for costly backup batteries to keep things
running during the switch. Thus, even at double the
current rates for industrial usage of state electricity,
removing inefficiencies from the EDL system would
suffice to make it operationally viable, although not
thriving, as a starting line for a privatization process, it
was argued.
Also critically mentioned were legal barriers that
prevented private sector producers from selling electricity into the national grid as well as undesirable
behavioral effects on end users by having introduced
generator metering at the wrong time. A proposal for
immediate substitution of state subsidies for electricity provision at the private household level would be
to hike tariffs and effectively institute a redistributive levy in the area where households have the least
need to buy additional generator services, namely in
the Beirut area, because residents there benefit from
low cost provision of power at rates not hiked in over
20 years.
Discussions at roundtable six, which like the
other events in the series deliberately did not involve politically-entwined individuals nor the “1
percent,” reflected the presence of “leftwing” and
“rightwing” perspectives in the current search for
a better economic and fiscal direction. In agreements across such barriers, however, all participants concurred that it was paramount to continue dedicating time and energy to emancipation
of Lebanon from paradigms of a society with a
weak state, widespread corruption, a large and
expansive public sector with entrenched social
entitlement niches but poor economic efficiency,
and sub-standard social justice and safety nets.
Empowering Lebanon will require many interrelated efforts and have to show measurable results as far as monetary stability at emergency
speed and structural reforms in the near term,
but also produce determined and conciliatory
economic mindsets for liberating a country that
for many years was frozen in socioeconomic
immobility with growing economic informality
and unmitigated poverty.
55
Executive 2019-2020
REFLECTION
Shadow of things to come
Reflections during tumultuous times
The year-end holiday season is a
time for self-reflection and goal setting.
We at Executive are no different, and
so as we prepare to bid 2019 goodbye,
we are looking backward to recognize
our achievements this year—despite the
trying circumstances—to understand
what we could have done differently, and
to explore ideas and opportunities for
growth that we will attempt to embark
on in 2020. However, there is a big obstacle. No one with a stake in Lebanon’s
economy, including media organizations
and journalists, can plan for the coming
year with any amount of certainty. In
terms of any rescue concept, the equation contains too many variables. Even
the scenarios of collapse that have been
discussed in the waning weeks of 2019
involve mountains of speculation.
Throughout its 21 years of history,
Executive has kept a watchful eye on
the Lebanese economy, applauding successes while also warning of troubling
indicators in hopes they would be addressed. At the end of 2018, Executive
warned of an economic meltdown (on
its end of year cover) and was proactive
in publishing an economic roadmap to
reboot Lebanon. Lebanon’s situation did
not improve as 2019 continued, and this
was reflected in Executive’s coverage.
In this and the previous issue of Executive, editors dedicated substantial
coverage to the protests and their impact
on the economy. In November, our main
focus lay in providing a platform for
comments and contributions from experts in addition to our own analysis and
reporting. The validity and relevance of
56
these efforts to foster dialogues on saving Lebanon will be made clear in the
year 2020, which is certain to be decisive
for the country. The thawra (revolution)
of 2019 brought on an avalanche of fake
and politicized news from two opposite
directions—those who resisted calls to
relinquish power and return looted assets, but also those who wanted to get
rid of the old regime at any cost. Uncorroborated stories, extreme accusations,
and unsubstantiated allegations flooded
virtual Lebanon, facilitated by the ease
of sharing information digitally on social media and WhatsApp. People no
longer knew what to believe or who to
trust. Thus, at this historic juncture and
turning point, Lebanon more than ever
before needs and deserves as many independent and responsible journalistic
voices, on the levels of media organizations and individuals in the profession,
as possible. Executive is well aware of
the need for analytical business and economic journalism as a crucial facilitation factor in securing the future of this
country. Editors are resolved to maintain
and further increase the magazine’s contribution to improve the fortunes of all
groups and social strata in Lebanon that
are committed to make this country the
dignified home of all its people.
The last quarter of 2019 bought with
it a lot of changes, some positive, such as
the political elite falling from their pedestals in the eyes of many, and the Lebanese recognizing their own power as
citizens. Negative changes were the economic situation that has forced people
to survive under a new financial reality.
Executive is in no way immune to the
winds of economic and financial change
sweeping the country.
Looking forward to 2020, what is
certain is that change is the only constant. In plain language, this means that
management and editors will collaboratively seek new funding and revenue
sources in the coming year. The magazine will also explore its digital development options. Executive’s many committed readers—whom editors use this
moment to thank and wish the best in
their endeavors—and our—hopefully
vastly growing numbers of opportunitybased readers—will be witnessing the
results of our efforts: new paths to convey our quality content, and new ways
to interact with audiences all over the
world, as well as new coverage. We will
keep exploring all these possibilities and
put all ideas on the table, but what will
not be up for debate, ever, is our mandate for responsible, transparent, and
independent journalism.
As our wish for Lebanon, and with
a bow to the paradigmatic narrative on
what the year-end holiday season means
in its most intercultural and constructive
sense for a bunch of economic writers at
this particular time, we borrow from
Charlies Dickens our wish that in 2020
every scrooge will find the economic
health to tell every Bob Cratchitt “I am
about to raise your salary!” in the recognition that shadows of things that have
not yet happened can lead to different
ends if courses are changed, even within
a hair’s breadth, to a path that is “open,
generous, and true.”
executive-magazine.com
EXECUTIVE
ECONOMIC ROADMAP
- DRAFT 3.0 -
FOREWORD
Lebanon stands at a crossroads. The mass popular uprising we have witnessed since
October 17 is unprecedented, astounding, and long overdue.
For 21 years, Executive has been providing expert analysis on Lebanon’s economy,
praising the good and raising increasing concerns over the bad. Too long these concerns
went unheeded by a political class that has proven itself not fit for purpose time and
again—and has now been resoundingly rejected by the street. We need to move
forward together as a country. We need to restore confidence in our economy and in
Lebanon itself.
Executive’s Economic Roadmap 3.0 is a comprehensive, collaborative action plan to
address the urgent needs of our country. It has not been hastily written following
the onset of the civil revolution, but instead builds on over 20 years of analysis and
coverage and more than a year of consultations that took place with civil society across
the country. This latest iteration, developed with the invaluable input of the experts
who took part in our November roundtable initiative, was revised to reflect our new
reality and the priorities it brings.
In its pages you will find a step by step approach to addressing Lebanon’s needs, some
measures now marked as more urgent than before but each with its own exigency. It
is a roadmap to a new Lebanon. A starting point to reimagine and rebirth this country.
Our political class had 30 years to fix Lebanon—they failed. Now it’s our turn.
Yasser Akkaoui
Editor-in-chief
3
EXECUTIVE ECONOMIC ROADMAP
Executive 2019-2020
Lead author Yasser Akkaoui
Editors Thomas Schellen
Nabila Rahhal
Susan Wilson
Sarah Shaar
Consulting Abdallah Harfouch
Adib Nehme
Albert Kostanian
Ali Abdollah
Antoinette Mounzer
Arkan el-Seblani
Asmahan Zein
Assaad Thebian
Assemani Leba
Auguste Bakhos
Aya Majzoub
Badri Meouchi
Bahi Ghubril
Bassel Salloukh
Bilal Mahdi
Cyrille Najjar
Dany Baz
David Munir Nabti
Diana Kaissy
Dona Maria Nammour
Eve Tamraz Najjar
Fabienne Saade
Farraj Maallawi
Farid Chehab
Fawzi Rahal
Firas Mghanes
Ghia Osserian
Ghida Anani
Gilbert Doumit
Hala Bajjani
Hala Faissal
Hassane Fattouh
Ihsan Razzouk
Imad Chacra
Jad Sharour
Jad Wehbe
Jamil Moawad
Jessica Obeid
Jihad Bitar
Joe Hatem
Josette Najjar
Josianne Fahed
Julien Courson
Kamal Tarazi
Karim Nasrallah
Karl Khoury
Lama Fakih
Lara Macauon
Layal Bahnam
Lina Ouediat
Marc Géara
Marc Haddad
Marwan Mikhael
Mariella Afif
Mazen Ziadeh
Mira Adra
Mireille Korab
Mona Achkar Jabbour
Mohamad Mansour
Mona el-Hallak
Mona Sukkarieh
Mounir Rached
Nada Rizallah
Nadim Haddad
Nadim Souhaid
Nadine al-Dib
Najat Saliba
Nasser Yassin
Nassib Ghobril
Nassim Arabi
Nayla Feghali
Nermine Sibai
Nicholas Rouhana
Nicolas Boukather
Nizar Sleiman
Omar Chatah
Omar Mezher
Ossama Safa
Paul Abi Nasr
Paulette Assaf
Pierre Habbouche
Rabih Chaer
Rami Rajeh
Randa Farah
Rbih Hassoum
Reine Abbas
Romen Mathieu
Roula Habis
Roula Mikhael
Roy Abdo
Ruben Elsinga
Saad Azhari
Saad Sabra
Salim Chahine
Salim Saad
Samer Hajjar
Sami Abou Saab
Sarah al-Sharif
Serena Abi Khalil
Sergio Jalil
Talal Salman
Tony Ramy
Toufic Fattouh
Toufic Saleh
Wael Kechli
Wafa Kotob
Wajiha Malaeb
Walid Ammar
Walid Genadry
Walid Sayegh
Wissam Jabr
Yahya Mawloud
Zahra Bazzi
Zaynab Razzouk
Zeina Abla
Zeina Daccache
Zeina Zeidan
Ziad Hayek
Executive’s Economic Roadmap 3.0 was produced with the support of
Konrad-Adenauer-Stiftung, and the media collaboration of Lebtivity
4
executive-magazine.com
INTRODUCTION
This document—Economic Roadmap 3.0—is the most definitive Roadmap yet in
Executive Magazine’s ongoing quest for providing a working platform for advancing
the Lebanese economy. Building on a first version published in the December 2018/
January 2019 issue of Executive, and a second version published with an additional
261 measures and three entirely new national priorities in February 2019, Executive
presents this third iteration at the end of 2019 in the hope that its reflection of fourthquarter developments will accelerate the discussions seen in Lebanon after October
17 and elevate the economic discussion to one that can generate a new and healthy
productive economy. As was the pattern from the beginning, we took a participatory
approach in deliberations of Economic Roadmap 3.0—this time by inviting both online
recommendations and querying around 50 diverse and qualified individuals in a series
of six roundtables conducted in November 2019 (see coverage on starting page 30). The
stakeholders at these tables ranged from representatives of civil society and persons
with personal commitment to Lebanon’s civil thawra (revolution), to economists,
industrialists, entrepreneurs, and academics.
As in the two previous Roadmap iterations, there was little or no disagreement on
the top priority for moving Lebanon to safe economic ground in the face of a financial
liquidity and confidence crisis that erupted from September 2019 in parallel to the
October protests. However, while many needs of the Lebanese economy had not been
met since we published Roadmap 2.0, priorities were added especially in the Build and
Reform pillar as well as in the Combat pillar, specifically in Combat Corruption. The
Build and Reform pillar addresses agenda priorities in the areas of fiscal policy, capacity
building, state institutions, judicial reform, and regulatory frameworks. Moreover, while
the list of pillars and agenda priorities in Roadmap 3.0 is the same as in iteration 2.0, we
note that the agenda items discussed at the November roundtables (agenda priorities
1-6, 8, 11-13, and 15-18) saw more additions, new emphases, and modifications
than the other five agenda priorities, but want to emphasize that the shifting toward
urgent issues and short-term economic survival priorities does not detract from the
importance of the remaining components in the Economic Roadmap. The fundamental
question over the best economic system for Lebanon is still open but one dichotomy,
a line of deceptive argumentation used throughout past periods of governmental
vacuums in Lebanon and into the period after the resignation of the Hariri government
at the end of October, has been revealed as fake news. This is the argumentation from
some political quarters that addressing the economy is more important than adhering
to the will of the people, as well as the view of some economic protagonists that
political health will follow upon a vigorous private sector performance. In truth, as the
last months of 2019 have proven, Lebanon needs a government that implements the
will of the people and an economy that serves them. Ultimately, Lebanon has to decide
what kind of system it wants to implement and move forward collectively. While the
country is seeking to rebalance state and society in a cogent new system, Executive
is committed to contribute to this vital search by continually striving for a definitive,
collaborative, and passion-empowered Economic Roadmap.
5
EXECUTIVE ECONOMIC ROADMAP
Executive 2019-2020
CONTENTS
Build & reform
Strategize
8
22
FISCAL POLICY
The governement must stabilize the
debt-to-GDP ratio and decrease
it with growth-oriented policies.
EDUCATION
Public education must be reformed to ensure
graduates are competitive in the local market.
12
CAPACITIES
Efforts should be taken to build capacities
across all sectors to increase productivity.
HEALTH
Efforts must be made to address medical
malpractice and health insurance
fraud concerns and to modernize the sector.
16
28
STATE INSTITUTIONS
Lebanese public administration must be made
more efficient and modern.
ENERGY
Improve inefficiencies in the energy
sector to provide power to Lebanese
and attract foreign investors.
18
JUDICIAL REFORM
Strengthen independence of the judiciary and
improve existing judicial institutions.
20
REGULATORY FRAMEWORKS
Regulatory frameworks must be introduced to
ensure a level playing field in the private sector.
6
25
31
WATER
Updates must be made
to current infrastructure and water
management practices.
33
TRANSPORT
Develop the transportation sector
to link ports and cities and improve
connections to neighboring countries.
executive-magazine.com
Combat
Develop
37
51
GENDER INEQUALITY
Action must be taken to eliminate
violence against women and amend outdated,
harmful laws.
COMPETITIVENESS
Increase competitiveness of Lebanese producers
in global markets.
40
POVERTY
The government must devise a sustainable
policy to combat poverty.
43
CORRUPTION
Corruption has permeated all aspects
of Lebanese society. Measures must
be implemented to stop this.
47
POLLUTION
The government must act to alleviate the
effects of pollution and implement reforms
to reduce further pollution.
54
ENTREPRENEURSHIP SUPPORT
To develop the economy, entrepreneurship
endeavors must be incentivized and supported.
58
LABOR
Quantify and qualify labor pool to better meet
labor market needs.
60
OUTREACH TO THE DIASPORA
Incentivize Lebanese expats
to return and combat the country’s
“brain drain.”
64
HERITAGE PRESERVATION
Reform legal structure regarding protection
of cultural property.
High priority
7
EXECUTIVE ECONOMIC ROADMAP
Executive 2019-2020
Build & reform
Agenda Priority 1
BUILD FISCAL POLICY
In the fourth quarter of 2019, the issues concerning Lebanon’s fiscal
performance and public debt outlook have become challenges of economic
survival. This new urgency only adds to the importance that has been enshrined
previously in Article IV reviews for Lebanon by the International Monetary Fund
(IMF). The IMF has repeatedly alerted officials that the debt burden could be
the prime risk source compromising financial stability, and could prevent the
government from attaining its economic objectives, stressing that a sustained
and balanced fiscal adjustment is essential.
Many contend that under the conditions observed since the fall of 2019, it
will not suffice to stabilize the debt-to-GDP ratio and gradually decrease it
with growth-oriented policies, as was done during the first decade of the
millennium. In this sense, the revised Agenda Priority 1 notes that the debt
impact of economic and fiscal policies adopted since the 1990s still remains
to be examined, as does the question of if and how corruption contributed to
the escalation of public debt in Lebanon beyond the growth of GDP. These and
other historic local and global factors deserve study, but in the immediacy of
2020 it has become paramount for the Lebanese state to reform and develop
fiscal measures.
Further inevitable is a reexamination of the banking sector, its ability to support
the government, private companies, and households, and the ways in which to
implement financially sustainable policies at Banque du Liban (BDL), Lebanon’s
central bank. BDL’s measures of debt management have been innovative, but
at a cost. Before CEDRE funds will be made available, genuine structural and
institutional reforms are needed at all levels.
Fiscal reform must introduce new instruments that are able to increase social
justice and sustainability as well as incentivize private investments and greater
economic activity. In addition, fiscal reform needs to be flanked by a proactive
approach for aligning and developing the monetary policy and capital markets
regime under the auspices of BDL, with the fiscal policies produced and
implemented by the Ministry of Finance (MoF).
The fiscal reform policy must be contextualized, with measures that increase the
primary surplus and rationalize expenditures; introduce institutional reforms to
improve credibility, transparency, and planning; and initiate structural reforms
to increase competitiveness and economic growth.
8
executive-magazine.com
Build & reform
POLICY PRIORITY 1.1
BUILD FISCAL POLICY
Main Challenges
Proposed Measures
•
Measure 1.1.1
Improve deliberation and adoption of state budgets. Implement budgets with strict
control, not to exceed spending targets, beginning with the 2019 budget. Commit to
public consultations for future budgets, as prescribed in the MoF Citizen Budget 2018.
•
•
•
Research tax base,
enhance tax incidence, and
strengthen progressive/
direct taxation
Update tax instruments
improve tax compliance,
and penalize tax evasion,
including income tax and
value-added tax
Rationalize (long-term)
debt instruments
Fulfill reform
pledges linked to the
CEDRE process and
other commitments of the
government
Measure 1.1.2
Expand comprehension of the size of the Lebanese tax base and incentivize participants
in the informal economies to enroll in the formalized economy and pay taxes.
Measure 1.1.3
Improve tax collection and educate citizens on the benefits of taxation.
Measure 1.1.4
Disincentivize tax evasion and smooth the transition from tax evasion to tax compliance
with help of grace periods and bridging measures.
Measure 1.1.5
Adopt digital tools to ease tax compliance and make taxation processes, including tax
rates, more transparent, and inclusive of all economic sectors.
Measure 1.1.6
Launch work on a new, progressive tax policy and remove tax loopholes for offshore
companies.
Measure 1.1.7
Review, expand, and ameliorate existing proposals on achievement of greater tax
efficiency and justice (unified income tax draft law).
Measure 1.1.8
Achieve greater transparency of fiscal expenditures and use of tax revenues by making
disclosures of fiscal allocations and tax usage mandatory for all ministries and state
agencies.
Measure 1.1.9
Introduce new modeling techniques at the MoF that enable better forecasting and
evaluation of the impacts of tax measures.
9
EXECUTIVE ECONOMIC ROADMAP
Executive 2019-2020
Build & reform
Agenda Priority 1
Measure 1.1.10
Streamline the issuance of new debt instruments and provide the citizens with clear
information about new debt needs and measures.
Measure 1.1.11
In the medium term, help smooth out the debt burden through stronger activation
of the secondary market. Publicly list all new debt instruments on the Beirut Stock
Exchange (BSE) and/or Electronic Trading Platform (ETP).
Measure 1.1.12
Diligently pursue all structural reforms that relate to the improvement of the fiscal
performance of Lebanon under existing commitments.
POLICY PRIORITY 1.2
FISCAL POLICY ALIGNMENT WITH MONETARY STABILITY
PRESERVATION AND A SOUND EXCHANGE RATE REGIME
Main Challenges
Proposed Measures
•
Measure 1.2.1
Defend the dollar peg in the near term, examine pathways for switching to a crawling
peg and depegging after restabilization of the exchange rate and identify appropriate
timing and conditions to review the policy with the purpose of revision.
•
•
•
Adjust exchange rate
regime in accordance with
policy needs.
Embellish monetary policy
in the form of interest rate
and inflation targeting
Refine the relationship
between BDL and the MoF
Increase the depth of
capital markets
Measure 1.2.2
Establish a process for regular reviews of macroeconomic conditions in Lebanon,
focusing on growth and stability.
Measure 1.2.3
Provide more disclosure of the decision and rationales used by BDL for their monetary
policy, interest rate decisions, and inflation targets.
Measure 1.2.4
Streamline the procedure for interactions between BDL and fiscal policy-makers, to
make the decision-making processes and outcomes more transparent.
Measure 1.2.5
Align fiscal policy with the stated objective of deepening capital markets in Lebanon
through the incentivization of capital market operations. Encourage participation and
investment in the Lebanese economy through usage of the new capital markets tool,
the ETP (under design).
10
executive-magazine.com
Agenda Priority 1
Build & reform
Measure 1.2.6
Encourage public listing of family-owned conglomerates and large businesses on the BSE.
Measure 1.2.7
Incentivize the floatation of young companies and startups, as well as small and
medium enterprises, on the ETP.
Measure 1.2.8
Increase transparency and awareness of the mandate of the Capital Markets Authority
in Lebanon.
Measure 1.2.9
Increase provision of technical support and fiscal incentives for the different classes of
companies seeking to be newly listed.
Measure 1.2.10
Mandatory for all companies benefitting from public funds to be listed on the Beirut
Stock Exchange with a 51 percent float.
11
EXECUTIVE ECONOMIC ROADMAP
Executive 2019-2020
Build & reform
Agenda Priority 2
BUILD CAPACITIES
Lebanon faces the challenges of a fast-moving globalized economy, but at the same
time has a backlog of lost development in economic capacities, brought on by decades
of internal and external conflicts and state inactivity. While partial changes to the code
of commerce were legislated in 2019, what remains to be overhauled is legislative
infrastructure for the public and private economy and the ease of doing business.
Processes and potential pitfalls of privatizations of state-owned or state-affiliated
enterprises need to be examined. The data foundations for economic and social
planning need to be determined, and productivity in the public and private sectors
also needs improvement.
Due to long neglect of these, and other economically decisive areas, capacities
in the public and private sector must be newly developed. There are experts and
professionals with the work ethic and know-how needed for public service, and
capacity building is an urgent priority to improve the collection, analysis, and usage
of data for public policy formation, fiscal modeling, and social programs. Also
necessary is the development of public sector capacities to support productivity and
improvements in all sectors, as well as the alignment of public and private entities
through completion of public-private partnership (PPP) legislation.
Public sector employees must be trained in governance, assistance, and supervision so
that they can not only support the PPP processes that were legislated in 2017, but also
achieve proper governance within public institutions. Lebanon continues to lack proper
statistics, upon which the formulation of economic policy must be based. So far, efforts
to build a statistical database have been sparse, uncoordinated, and insufficient, hence
the need for a master plan with the objective of building a long-term database.
The principal objective of privatizing state-owned enterprises is to promote growth
and modernize the economy, not to generate revenues. Privatization, which can take
several forms (e.g., build-operate-transfer, management contracts, full or partial sale,
partnership with strategic international investors, etc.), remains the main bridge
that is expected to transform and modernize the Lebanese economy. Privatization,
however, should be considered on a case-by-case basis. PPPs can offer a reliable
alternative in many instances.
While restructuring state-owned enterprises and legislative development—including
the introduction of a competition law and regulatory authority—remain a prerequisite
to any successful privatization program, the government must fully commit to the
privatization option and announce its intention to resume this program.
Privatization should not be considered as an option to generate revenues to meet
short-term fiscal needs, but must instead be viewed as a process that will yield
dynamic economic benefits in the long run.
12
executive-magazine.com
Build & reform
POLICY PRIORITY 2.1
DEVELOP CAPACITIES FOR DATA COLLECTION,
ANALYSIS, AND USE
Main Challenges
Proposed Measures
•
Measure 2.1.1
Review the CAS’ capacities and invest in development of underpowered areas at the
organization. This includes recruiting and training qualified statisticians and staff, and
investing in data collection capabilities and software needed for analysis.
•
•
•
Empower the Central
Administration of Statistics
(CAS)
Devise and implement a
census
Develop a statistical master
plan
Coordinate between
CAS projects and other
stakeholders in the public
administration and private
sector
Measure 2.1.2
Legislate a census for Lebanon.
Measure 2.1.3
Implement the census.
Measure 2.1.4
Assist the CAS in developing a statistical master plan, and implement any agreements
with foreign institutional counterparts. Integrate public and private sector
stakeholders into the development of the statistical master plan for participation in its
implementation.
Measure 2.1.5
Engage private sector stakeholders to supply anonymized data for statistical analysis
needed for policy-making, and provide businesses with access to assist private sector
decision-making.
POLICY PRIORITY 2.2
ENHANCE CAPACITIES IN THE PUBLIC SECTOR
Main Challenges
Proposed Measures
•
Measure 2.2.1
Assess the level of technical competencies and gaps in public sector ministries and
agencies, as well as the number of unnecessary or overlapping bodies.
•
Create an adequate human
capital base of technical
experts
Create an adequate human
capital base of governance
and competition experts
Measure 2.2.2
Devise a plan to train or hire workers to fill identified gaps and determine the
associated costs, in parallel to moving or reducing the number of workers in undefined
and unnecessary roles.
13
EXECUTIVE ECONOMIC ROADMAP
Executive 2019-2020
Build & reform
Agenda Priority 2
POLICY PRIORITY 2.3
INCREASE PRODUCTIVITY
Main Challenges
Proposed Measures
•
Measure 2.3.1
In collaboration with commercial banks, financial intermediaries, capital market
stakeholders, and Banque du Liban (BDL), Lebanon’s central bank, establish various funds
and capital markets instruments that will boost access to equity, credit, and investments.
•
•
Address absence of effective
financial markets
Uplift policy framework
including privatization
program
Overhaul foreign direct
investment (FDI)
promotion channels
Measure 2.3.2
Incentivize international joint ventures and technology transfer alliances by improving
intellectual property rights protection, offering fiscal incentives, and removing non-tax
barriers to businesses.
Measure 2.3.3
Invest in the institutional capacities and human capital of regulators that are deemed
productivity boosters in financial markets, public services, and the real economy.
Measure 2.3.4
Encourage the attraction of FDI by upgrading investment agencies with more human capital
and larger budgets for marketing and advertising in foreign jurisdictions, and increase
incentives for inflows of FDI that contain technology transfer components.
POLICY PRIORITY 2.4
ENABLE THE BUSINESS AND INVESTMENT CLIMATE
Main Challenges
Proposed Measures
•
•
•
Measure 2.4.1
Further modernize existing laws pertaining to competition, anti-dumping, intellectual
property, antitrust, small- and medium-sized enterprises, quality-enhancing,
bankruptcy and insolvency, code of commerce, and the building code.
Update legislation
Facilitate trade
Streamline interactions
with the state and remove
red tape
Measure 2.4.2
Create legislation that would allow for small debts recovery.
Measure 2.4.3
In the interest of improving trade facilitation, evaluate existing assessments, such
as the World Bank’s Doing Business report and similar international benchmarks on
practices and barriers in Lebanon—act to address issues raised.
14
executive-magazine.com
Build & reform
Measure 2.4.4
Introduce e-government solutions and improve omni-channel access to governmental
procedures, such as customs, to reduce red tape on import and export trade
procedures.
Measure 2.4.5
Introduce a government-backed export program with an added mandate of educating
companies on how to export.
Measure 2.4.6
Create a trade and finance program and restructure all trade debts.
POLICY PRIORITY 2.5
MAKE PRIVATIZATION WORK
Main Challenges
Proposed Measures
•
Measure 2.5.1
Complete and implement PPP legislation and empower independent oversight bodies
that can contribute to the efficient delivery of services of PPPs, including the judiciary,
regulatory bodies, and civil society.
•
•
•
Remove barriers to
privatization of stateowned enterprises
Complete and empower
PPP framework
Increase public sector
understanding of
privatization and PPP
Improve oversight
structures and mechanisms
Measure 2.5.2
Make state-owned enterprises market ready to operate as private sector entities.
Measure 2.5.3
Determine public good priorities to be met by privatized entities.
Measure 2.5.4
Activate capital markets in the context of privatization of state-owned enterprises.
Measure 2.5.5
Review privatization proposals on a case-by-case basis, and implement solutions to
provide the services of privatized companies aligned with social and public interests.
Measure 2.5.6
Intensify existing nascent training of municipal, provincial, and national agencies in
order to enable them to evaluate and manage PPP projects and procurements.
15
EXECUTIVE ECONOMIC ROADMAP
Executive 2019-2020
Build & reform
Agenda Priority 3
BUILD STATE INSTITUTIONS
Public administration in Lebanon should adhere to meritocratic standards and need to
meet paradigms of work ethics and efficiency. To migrate to a healthy public administration,
it is of utmost importance that elected authorities reduce the size of the public sector
and implement lawful and transparent hiring. On the national level, a civil service revamp
should further eliminate inefficient, budget-draining programs, departments, and agencies,
continuing steps initiated in autumn of 2019. On the sub-national level (regional and
municipal administrations), the aim should be to decentralize decision-making, utilize
new technologies, and increase productivity. Prerequisites for decentralization include:
reformation of the legal and institutional setup of control institutions (e.g., public audit,
civil service board, and central inspection); establishing a digital and transparent system
for budget control and management; and restructuring districts according to economic
parameters aimed at social cohesion. A merit-driven public administration would be the key
to attracting foreign investment, creating jobs, and restoring confidence in the local economy.
POLICY PRIORITY 3.1
MODERNIZE THE CIVIL SERVICE
Main Challenges
Proposed Measures
•
•
•
Measure 3.1.1
Develop new legislation to consolidate previous draft laws for decentralization at the
municipality level.
Tackle decentralization
Overhaul the civil service
Eliminate corruption and
dead-end careers
Measure 3.1.2
Improve legislation for determining responsibilities and decentralization structures for
levels beyond the municipality.
Measure 3.1.3
Decentralize decision-making and institutions by empowering local governments
(i.e., with resources, enforcement capabilities, and financial autonomy) and creating
regional offices for service ministries.
Measure 3.1.4
Evaluate all holdings and assets of the state to identify and better allocate the use of
these resources.
Measure 3.1.5
In the context of overhauling the civil service, examine options for early retirement
packages to reduce staff bloat and redundancies of workers, particularly in quasipublic entities providing public services.
Measure 3.1.6
Redesign and rationalize incentives including overtime allowances and non-monetary
incentives for civil service employees.
16
executive-magazine.com
Build & reform
Measure 3.1.7
Enhance institutional oversight and accountability bodies with the aim of reducing
corruption and improving public sector productivity (more policy targets and
measures on combating corruption can be found in Agenda Priority 12).
Measure 3.1.8
Ensure the implementation of whistleblower protection legislation and adequate
mechanisms for reporting infractions.
Measure 3.1.9
Align institutional development with a roadmap for e-government, and adjust
organizational charts of public entities to comply with an e-government roadmap.
Measure 3.1.10
Restore the sole authority of the Civil Service Board as the oversight body for the
examination and hiring of public sector employees.
POLICY PRIORITY 3.2
REFORM MINISTRIES AND AGENCIES
Main Challenges
Proposed Measures
•
Measure 3.2.1
Examine the allocation of ministries and ministerial portfolios under economic and governance
perspectives, eliminate political power distribution as a reason for ministerial appointments,
and condense the number of ministries to be more in line with international standards.
•
Remove redundancies in
the ministerial space
Align political and
economic objectives in
distribution of public
administration units
Measure 3.2.2
Implement the consolidation of agencies with overlapping authorities and functions
as proposed in the October 2019 governmental rescue plan (such as the Council for
Development and Reconstruction, the Council of the South, the Displaced Fund, and
the Higher Relief Committee) and expand consolidation process further.
Measure 3.2.3
When warranted by economic needs, establish new institutional competencies. For
example, independent agencies for export promotion or diaspora relations.
Measure 3.2.4
Ensure the independence of the Special Investigation Commission and appoint a
chairman who is independent from, rather than head of, the central bank.
Measure 3.2.5
Improve the disclosure processes of draft legislation and enable greater public
participation in the drafting of legislation. Attendance records of all parliamentary sessions
and the voting records of parliamentarians should be made easily accessible to the public.
Measure 3.2.6
Institute a credit bureau that has a governmental mandate of collecting information
and ensuring adherence to contracts and agreements.
17
EXECUTIVE ECONOMIC ROADMAP
Executive 2019-2020
Build & reform
Agenda Priority 4
JUDICIAL REFORM
Lebanon’s current judicial system has been in place since the country’s independence,
but this longevity belies the judiciary’s manifold weaknesses. The main points of
concern are over weak independence and inefficiency of the judiciary, especially in
the time lag on judgments achieved in judicial proceedings. A key demand in this
regard is the strengthening of judicial independence. Another aspect of concern
is that confessional considerations have influenced the judicial selection process.
Military conflicts in Lebanon in the second half of the 20th century affected the
political system and the independence of the judiciary, eroding citizens’ confidence
in both. Critics of the judicial system in civil society cite interference in the courts,
particularly internal interference by judges in the Higher Judicial Council (HJC), as
“commonplace.” These critics argue that every citizen needs to feel protected by the
courts, regardless of their sect or standing in society. The current system does not
provide this guarantee.
Barriers against the possibility of holding public servants accountable for their actions,
and possible infractions, have to be removed. Provision of immunity from legal
repercussions for all public servants, including ministers, must be examined and, if
necessary, amended to improve judicial accountability.
Incentives for judges to avoid engaging in corrupt activities must be developed. The executive
branch has significant influence in the selection process of the HJC, which is a violation of
the democratic principle of the separation of powers. Structural problems may also arise
from the HJC’s authority to transfer judges between posts without the judge’s consent. Civil
society activists note that judges are appointed as consultants for various administrations,
again blurring the lines of the separation of powers. This, moreover, becomes a way to bribe
judges, as salaries increase for each additional consultancy position.
In an independent judiciary, the principle of the immovability of judges is an integral
factor. A judge’s qualifications, impartiality, and experience should be the basis for
promotion. Currently, judges operate with little oversight, as no evaluation mechanism
is in place to monitor effectiveness and competency after appointment.
POLICY PRIORITY 4.1
INCREASE THE ABILITY OF JUDICIARY TO FUNCTION INDEPENDENTLY
Main Challenges
Proposed Measures
•
Measure 4.1.1
Pass the draft law on judicial independence and transparency as a concrete measure
toward building a strong judiciary.
•
•
•
•
Improve access to judicial
records
Institute merit-based evaluation
mechanism for judges
Improve judicial independence
Build resilience to corruption
Align standards for Lebanese
judiciary with international
standards
Measure 4.1.2
Adopt periodic evaluation of judges and create a personnel file for each judge to
track performance. Establish an objective criteria as a basis for appointments and
promotions, and ensure that promotions are based on merit and competence.
Measure 4.1.3
Integrate the principle of immovability of judges into current practices.
18
executive-magazine.com
Build & reform
Measure 4.1.4
Improve recruitment of competent, quality judges by increasing impartialities in
the entrance exam and limiting the weight of the oral exam in the final grade as this
assessment is more vulnerable to the examiner’s biases.
Measure 4.1.5
Review the judiciary system of the military court and ensure that civilians are treated
under civil jurisdictions.
Measure 4.1.6
Strengthen judiciary mechanisms to ensure compliance with international
conventions, such as the UN Convention on the Rights of the Child and UN Convention
against Torture and Other Cruel, Inhuman or Degrading Treatment or Punishment.
POLICY PRIORITY 4.2
IMPROVEMENT OF JUDICIAL INSTITUTIONS
Main Challenges
Proposed Measures
•
Measure 4.2.1
Restructure HJC to ensure representation and independence of different categories
and grades of judges.
•
•
Reform the Higher Judicial
Council
Legislate and facilitate the
inclusion of officials
Enhance integrity and
transparency
Measure 4.2.2
Remove conflict of interest issues by addressing the practice of judges working as
consultants for governmental administrative entities.
Measure 4.2.3
Adopt laws to ensure the complete financial and administrative independence of the
judiciary.
Measure 4.2.4
Limit immunities of heads of state, ministers, legislators, and other public officials
through the empowerment of the appropriate institutions under Article 80 of the
Constitution of the Republic of Lebanon.
Measure 4.2.5
Embellish the framework for easing citizens’ access to non-court arbitration
procedures, for example, by creating the position of ombudsman to support citizens’
pursuit of justice.
Measure 4.2.6
Digitize all court records and proceedings, and provide access to these records where warranted.
19
EXECUTIVE ECONOMIC ROADMAP
Executive 2019-2020
Build & reform
Agenda Priority 5
BUILD REGULATORY FRAMEWORKS
Legal and regulatory frameworks provide assurance to markets, offering a level and
competitive playing field to businesses in an increasingly globalized and complex
environment. A healthy legal and regulatory environment is one that continuously
adapts local and national practices to international best practices. In Lebanon, many
of these frameworks have not been kept up to standard, leaving regulators and the
private sector to operate in uncertain business environments, less able to compete
in the global economy. In order for the private sector to operate within a steady
business environment that also enforces relevant laws and rules, Lebanon must
appoint or re-mandate regulators that independently govern their relevant industries.
Lebanon should develop alignments with global regulatory standards, as exemplified
for financial standards. Other industries should lobby for regulatory frameworks that
will allow corporations to embed cultures that are adaptive to change. Beyond these
frameworks, buy-in and reinforcement of regulations are key to the success of their
implementation.
POLICY PRIORITY 5.1
MODERNIZE REGULATORY FRAMEWORK
Main Challenges
Proposed Measures
•
Measure 5.1.1
Review current measurements of risk exposure of banks, modernize the legal
framework of credit guarantees and debt recovery procedures, and improve the credit
system.
•
•
•
Modernize the legislative
framework against money
laundering and hot money
Assess and improve the
enforceability of anticorruption regulations
Upgrade regulatory
frameworks and incentives
for small and medium
enterprises
Improve regulatory
frameworks and incentives
for startups, green projects
and instruments
Measure 5.1.2
Appoint, rejuvenate, and empower the Telecom Regulatory Authority, the Lebanese
Petroleum Administration, the Insurance Control Commission, and the Electricity
Regulatory Authority to further empower independent regulatory institutions.
Measure 5.1.3
Reinforce the role of the Capital Markets Authority and provide it with the
necessary resources to go beyond monitoring and assessing the markets to a market
development function. The CMA should be responsive, facilitate enquiries by private
investors, as well as establish a system of communication that is user friendly and
efficient.
Measure 5.1.4
Proceed in the privatization of the Beirut Stock Exchange (BSE) and the Electronic
Trading Platform (ETP).
20
executive-magazine.com
Build & reform
Measure 5.1.5
Put in place incentives and regulatory frameworks to encourage the proliferation
of, and financing and investment into, SMEs and startups, including incentives with
emphasis on green investments.
Measure 5.1.6
Develop new legislation to consolidate previous draft laws for the insurance sector to
promote proper competition and better protect policy-holders.
Measure 5.1.7
Standardize operating procedures and codify health regulations in the hospitality
sector.
Measure 5.1.8
Fully implement Law 28 (2017) on access to information and coordinate a national
plan for combating corruption; issue auxiliary legislation to form the national anticorruption commission.
Measure 5.1.9
Enhance competitiveness in the economy by passing legislation and measures to
improve the doing business environment, as per Policy Priority 2.4: Enable the
Business and Investment Climate.
21
EXECUTIVE ECONOMIC ROADMAP
Executive 2019-2020
Strategize
Agenda Priority 6
STRATEGIZE EDUCATION
Lebanon faces the need to overhaul its education system in line with current
understandings of emotional and social development processes and knowledge
acquisition of children and youth. Given the fragmentations of the existing system,
especially along the lines of private and public schooling, an improvement of overall
education outcomes is needed across institutions, from kindergarten to high school,
universities, and vocational schools. Under consideration of the shrinking ability of
households to finance quality education from their own resources, and with regard
to the importance of education that enables today’s youth to sustain themselves in a
digital economy, the importance of revising and reinventing education systems from
angles of financing and pedagogics is heightened. Academic institutions across the
country are generally under-funded and operate with little oversight. There is little
consistency in education policy and Lebanon’s students emerge into a labor market that
is incapable of absorbing the high number of graduates, exacerbating the brain drain.
Lebanon’s educational system must provide access to all school-age students, a
challenge that has become more acute in the face of growing inability of households
to finance private education. Academic facilities across the country must be enhanced
to accommodate and improve educational access for those with physical and
intellectual disabilities.
The Ministry of Education and Higher Education (MoEHE) must build on best practices
and existing programs to reform curricula, and build resilient and autonomous
academic governing structures and educational institutions. Successful educational
reform must focus on the core components of teaching, learning, and preparing
children for the digital era. These reforms need to be made under the umbrella of the
Center for Educational Research and Development (CERD). But first, the CERD must
be rejuvenated to operate at capacity. The MoEHE’s human resource strategy and
structure also must be urgently addressed.
POLICY PRIORITY 6.1
CREATE A NATIONAL VISION FOR EDUCATION
Main Challenges
Proposed Measures
•
Measure 6.1.1
Redesign a curriculum for schools that puts skill building at the center, and that
focuses on the 8 Cs (curiosity, collaboration, composure, compassion, creativity,
communication, collaboration, and citizenship).
•
•
•
22
Ensure national
curricula are in line with
international standards
Prioritize new knowledge
and national libraries
Utilize existing networks
and best practices
Pursue integration of
special needs student
Measure 6.1.2
Study and emulate the best education practices worldwide, e.g. the Finnish model.
Measure 6.1.3
Review and revise the content of the Lebanese Baccalaureate exams.
Measure 6.1.4
Develop a monitoring and evaluation mechanism that can be used to build a statistical
foundation to measure and evaluate the quality of education.
executive-magazine.com
Strategize
Measure 6.1.5
Using the existing statistical database, incorporate evidence-based policy to review and
revise the structure of the public education system, and to strengthen governance and
accountability.
Measure 6.1.6
Pursue new international agreements and expand existing agreements for university
exchange programs.
Measure 6.1.7
Establish an auditing system at the MoEHE so that education standards are equal
across public and private schools at all education levels.
Measure 6.1.8
Develop new continuing education initiatives for educators to learn latest practices
and incorporate technology into the classroom.
Measure 6.1.9
Ensure enrollment access from kindergarten to high school for all students, regardless
of gender, orientation, religion, socioeconomic or residency status, and physical and/
or intellectual disability.
Measure 6.1.10
Develop new legislation to consolidate previous draft laws and require all public
and private schools to accommodate students, faculty, and staff with disabilities. In
addition, this legislation must eliminate discriminatory admission policies and costs,
and ensure inclusive curricula, staff training, and reasonable accommodation.
Measure 6.1.11
Require all public and private schools to upgrade facilities with necessary infrastructure—
such as ramps, elevators, and accessible restrooms—for students with physical disabilities.
Measure 6.1.12
Develop alternative learning paths for students with special needs, and enhance
faculty capacities for inclusive education.
POLICY PRIORITY 6.2
DEVELOP A SKILLED LABOR FORCE
Main Challenges
Proposed Measures
•
•
Measure 6.2.1
Develop and support technical schools and incorporate alternative training across all
institutions. Develop night school programs at secondary, technical, and university
education levels to provide workers with the opportunity to develop their skills.
Diversify education
Promote lifelong learning
23
EXECUTIVE ECONOMIC ROADMAP
Executive 2019-2020
Strategize
Agenda Priority 6
Measure 6.2.2
Develop external programs at universities in collaboration with ministries, academic
organizations, and other relevant parties to develop skill sets relevant to the private
sector.
Measure 6.2.3
Subsidize software and language classes for part-time and full-time workers and those
employed at enterprises that have 10 or fewer workers.
Measure 6.2.4
Offer incentives to employers so that businesses invest in their workforce and
employees have access to continuing education programs.
Measure 6.2.5
Enhance the matching of labor market and education provision with the collaboration
of an inter-ministerial task force.
POLICY PRIORITIES 6.3
STRENGTHEN PUBLIC EDUCATION
Main Challenges
Proposed Measures
•
•
Measure 6.3.1
Establish a national accreditation board to review and, if necessary, revise licenses of
academic institutions.
Standardize education
Strengthen institutional
autonomy
Measure 6.3.2
Amend governance and the legal framework of the Lebanese University to increase
its independence with regard to the selection of all administrative posts, recruitment
policy of professors, and research.
Measure 6.3.3
Empower the Lebanese University to seek non-governmental sources of funds
(e.g., endowment).
Measure 6.3.4
Provide incentives for professors at the Lebanese University to seek research funding
(e.g., reduce teaching load and incorporate into promotion policy).
24
executive-magazine.com
Strategize
Agenda Priority 7
STRATEGIZE HEALTH
A checkup on the overall robustness of the nation’s health infrastructure would show
that the vital signs of the country’s health sector are generally good, albeit with some
lingering concerns, such as reports of malpractice and medical insurance fraud. Further,
it must be ensured that access to healthcare is available for everyone in Lebanon.
This examination is in the context of Lebanon’s impromptu multi-year stress test—the
unplanned influx of Syrian refugees that began accelerating in 2013, placing strain on
Lebanon’s medical centers, hospitals, and primary health facilities—during which the
health system has not buckled. Since the onset of Lebanon’s liquidity crisis in the second
half of 2019, however, concerns have furthermore been raised with regard to funding
imported medicines and medical equipment. The overall diagnosis is that the healthcare
sector requires coordinated development between the public sector and the for-profit
and nonprofit private sectors. The private sector needs to learn from the experiences
of public health institutions and the Ministry of Public Health (MoPH) over the last few
years, adopting lessons learned and best practices. Greater attention must be paid to
public health issues, like the harmful effects of open waste burning.
On the public sector side, there are any number of improvements that still need to be
made. This should begin with a restructuring of the MoPH, where manpower seems to
be overstretched and has thus far not been reorganized due to political interference.
Working on the issues that the ministry has not addressed—such as closing coverage
gaps and eliminating structures that are producing inequalities in these areas—must
also be prioritized. The ministry must hone its ability to regulate and supervise, and it
has made progress on that front. Greater effort must be made to reposition the MoPH
as a regulatory body, pivoting away from its service delivery role.
Both public and private health institutions need to create a better popular
understanding of the connections between their work and mutual collaboration, and
the benefits to overall public health. Stakeholders seem not to have coordinated their
public relations in this regard, and private stakeholders are stuck in a sort of family
business mentality when it comes to communication, or the lack thereof, with the
media. Awareness building within the general population must become a greater
priority, necessitating clear communication strategies and greater transparency from the
private sector, the MoPH, and public health institutions.
POLICY PRIORITY 7.1
MODERNIZE THE LEGISLATIVE AND INSTITUTIONAL FRAMEWORK
Main Challenges
Proposed Measures
•
Measure 7.1.1
Organize a health forum where stakeholders can contribute to support the national
strategy and manage expectations and priorities. The forum can also serve as a
platform to communicate policy direction and outcomes with the media and public.
•
•
Define the role and
mandate of the MoPH
Improve hospital
supervision
Improve patient rights
Measure 7.1.2
Assess and revise licensing of health facilities and identify new criteria for medical
centers to operate under. After institutions are accredited, implement follow-up
checks to ensure standards are consistently met.
25
EXECUTIVE ECONOMIC ROADMAP
Executive 2019-2020
Strategize
Agenda Priority 7
Measure 7.1.3
Establish an autonomous regulatory agency that collaborates with the MoPH to
regulate the pharmaceutical sector, with its main objectives being to ensure high
standards, fair competition, and equal access, and to incentivize import substitution of
medicines with locally manufactured medication.
Measure 7.1.4
Engage with the Order of Physicians to introduce sanction mechanisms regarding the
handling of medical malpractice lawsuits or complaints.
Measure 7.1.5
Digitize personal medical records, starting with first contact at primary healthcare
centers, to be used at secondary and tertiary medical facilities.
Measure 7.1.6
Put together a national committee that, in collaboration with the National Council for
Scientific Research, the World Health Organization, and international organizations,
will define a research agenda for health priorities and seek yearly grants.
POLICY PRIORITY 7.2
IMPROVE SOCIAL INSURANCE SYSTEMS
Main Challenges
Proposed Measures
•
Measure 7.2.1
Activate the role of the intra-agency technical committee that represents all healthcare
related funds to map the current situation, identify overlaps and forms of abuse, and
present a set of recommendations. Publish the report and hold parties accountable to
implement the recommendations.
•
•
Public funds and social
security
Empower insurance
supervision
Private insurance
Measure 7.2.2
Finalize the automation of the National Social Security Fund and introduce webenabled services, starting with tracking applications and direct wiring of refunds for
eligible beneficiaries.
Measure 7.2.3
Empower the Insurance Control Commission and transform it into an independent
regulatory agency.
Measure 7.2.4
Take steps toward the provision of universal healthcare through the expansion of health
insurance coverage.
26
executive-magazine.com
Strategize
POLICY PRIORITY 7.3
LAUNCH AN EDUCATIONAL AND CIVIL SERVICE CAMPAIGN
Main Challenges
Proposed Measures
•
Measure 7.3.1
Enhance the provision of healthcare services to families and individuals who are
threatened by poverty in light of the crisis in Lebanon
•
Raise awareness on preventive health
Raise public awareness on
health-related issues
Measure 7.3.2
Offer free wellness packages at primary healthcare centers for individuals who fit the
criteria for extreme poverty. Subsidize an annual general checkup at select hospitals
for citizens of low-income status, and all citizens above the age of 50.
Measure 7.3.3
Develop nursing programs and a faculty of nursing as part of Lebanese University,
which would include internships at hospitals in rural or impoverished areas, or in
mobile clinics.
Measure 7.3.4
Launch year-long public awareness campaigns targeting seasonal, communicable,
and non-communicable diseases and ways to prevent and combat them, and run
campaigns explaining the right to healthcare and how to exercise it.
POLICY PRIORITY 7.4
IMPROVE PUBLIC HEALTH
Main Challenges
Proposed Measures
•
•
Measure 7.4.1
Launch awareness programs in all schools to teach children about recycling and
conservation, and ensure that schools recycle.
•
Boost recycling efforts
Stop uncontrolled waste
burning
Improve food safety and
restaurant inspections
Measure 7.4.2
Create a comprehensive public health strategy to tackle the health problems resulting
from uncontrolled waste burning.
Measure 7.4.3
Implement Law 35 (2015) on food safety, including the Food Safety Lebanese
Commission (FSLC). Train inspectors and ensure they have adequate capacity to carry
out inspections.
27
EXECUTIVE ECONOMIC ROADMAP
Executive 2019-2020
Strategize
Agenda Priority 8
STRATEGIZE ENERGY
Lebanon’s power sector is essential to economic development, yet it has turned into
a heavy burden due to inefficiencies. If properly run and operated, it could easily
become a major target of foreign direct investment and a primary catalyst for economic
growth. Over the past decades, the power sector—primarily because of the public
utility, Electricité du Liban (EDL)—has consumed billions of dollars from the treasury,
due to annual deficits of $1.5-$2 billion, depending on fuel prices, thus contributing
more than 40 percent of the public debt. Meanwhile, service provision has worsened
over the years (as the electrical grid deteriorates and electricity demand grows). The
situation is alarming and necessitates immediate, yet sustainable, action. Lebanon is
moving forward on oil and gas exploration, and hopefully the country will find and extract
enough natural gas resources to at least fuel domestic power generation, although this
will take on average eight years, even if exports to foreign markets prove elusive. While the
power sector requires that sustainable solutions be implemented sooner rather than later,
switching to natural gas in anticipation of the discovery of local reserves will not only provide
the necessary infrastructure and prepare the power sector for that phase, but is also cheaper
than the heavy fuel oil and diesel oil currently being used, and more environmentally friendly,
reducing the sector’s greenhouse gas emissions. To uphold commitments to the 2015 Paris
Agreement on climate change, Lebanon must invest heavily in renewable energy generation,
taking advantage of the country’s abundant renewable resources, thus diversifying the
country’s energy sources, decreasing its dependence on fossil fuels (with their price
volatility), and improving the country’s energy security.
POLICY PRIORITY 8
DEVELOP AND IMPLEMENT A SUSTAINABLE ENERGY POLICY
Main Challenges
Proposed Measures
•
Measure 8.1
Revise the April 2019 electricity policy paper to propose optimal solutions in light of
the economic crisis and liquidity shortage, and amend the timeframes and issue a
fiscal analysis showcasing the soundness of the proposed solution.
•
•
•
•
•
•
•
28
Improve sector’s
governance, regulation, and
procurement processes
Sustainably increase power
generation
Cut down on technical and
non-technical losses
Reduce the cost of power
generation
Equitably increase the
electricity tariff
Restructure EDL
Strategize for offshore and
onshore exploration
Develop regional
partnerships and grid
networks
Measure 8.2
Improve governance in the sector through a consistent regulatory and procurement
framework, limiting the monopoly of any entity and promoting healthy competition
and transparency.
Measure 8.3
Reduce the fiscal deficit in the power sector through the reduction of technical and
non-technical losses and the gradual removal of subsidies in line with an increase in
permanent power generation, as well as significantly reduce illegal connections, and
implement more efficient bill collection, so that all Lebanese have equal access to
electricity and pay their fair share. A hike in tariff prior to a drastic cut in non-technical
losses will result in increased losses.
executive-magazine.com
Strategize
•
•
•
•
Increase competition in the
gas and fuel import markets
Boost the share of gas in
the energy mix
Remedy absence of
comprehensive national
energy strategy
Develop integrated strategy
that covers fossil and
renewable energy resources
Measure 8.4
Fully implement Law 462 (2002) by appointing an independent regulatory authority
with full authority and an independent fiscal and managerial mandate, to regulate the
sector and restructure EDL into an optimal governance structure. The electricity utility
should be unbundled and separated into generation and distribution companies,
potentially keeping the transmission component under the auspices of EDL. The
strategy should draw on lessons learned from previous policies and other countries’
case studies to develop and implement solutions to modernize the sector and turn
it profitable by, among other things, involving the private sector through a publicprivate partnership. This may reduce the size of the workforce needed at EDL, while
improving the mandate.
Measure 8.5
Fully implement EDL’s Master Plan for grid reinforcement. An increase in additional
capacity prior to necessary grid improvement would result in additional fiscal losses.
Measure 8.6
Revise downwards the plan to implement the three unnecessary floating storage and
regasification units and the timeframe for project completion, as the previous plans
of switching to natural gas are no longer realistic in light of the long delays in contract
award and signature.
Measure 8.7
Promote transparency and access to information at the level of the Ministry of Energy
and Water (MoEW) and all administrative units relating to energy issues, and make
studies, tenders and contracts publicly available.
Measure 8.8
Specify clear mandates for each institution operating in the sector, and ensure that all
operating entities are official departments of the MoEW.
Measure 8.9
Conduct a full audit for EDL and all institutions operating within the sector.
Measure 8.10
Develop a comprehensive energy strategy, through a process of stakeholder
engagement, that increases power generation and distribution efficiency at optimal cost
to secure Lebanon’s long-term energy needs and improve overall sector governance.
29
Executive 2019-2020
EXECUTIVE ECONOMIC ROADMAP
Strategize
Agenda Priority 8
Measure 8.11
Develop a national oil and gas strategy that would forecast different scenarios and
assess them based on: market prices, sizes of discoveries, types of hydrocarbons
found, development solutions for fields, costs of exploration and production, market
conditions, geopolitics, and domestic politics and market.
Measure 8.12
Fully integrate Lebanon into the six-nation power grid and regional gas pipelines, in
addition to networks linking the Middle East with the European Union. This presents
vast opportunities for Lebanon in terms of imports and, potentially, future exports if
Lebanon discovers oil or gas, and employ electricity generated from renewable energy
sources for better grid integration and balancing of the systems.
Measure 8.13
Implement plans to enhance transparency and improve competition in the upstream,
midstream, and downstream gas and fuel import markets.
Measure 8.14
Incentivize the development of an upstream market and develop services and logistics
across the entire extractives value chain, promoting Lebanon as a regional hub for
international companies active in the Eastern Mediterranean.
Measure 8.15
Increase the share of gas in the energy mix, starting with power production. In case
of commercial gas discoveries, encourage consumption of local gas in the transport
sector and in the development of a petrochemical industry.
Measure 8.16
Implement clean energy production incentive tools. This can be done by amending
Law 462 (2012) to allow feed-in tariffs (FIT) to be introduced, or by introducing net
metering that would allow consumers to inject power generated at their premises into
the grid.
Measure 8.17
Issue and implement a renewable energy and energy efficiency law, which would
provide the MoEW with a framework for mainstreaming energy efficiency and
renewables management in Lebanon.
30
executive-magazine.com
Strategize
Agenda Priority 9
STRATEGIZE WATER
Lebanon is blessed with substantial natural water resources, including surface water,
groundwater, and spring water, but little has been accomplished in the way of conservation or
sustainable exploitation of these resources. Mismanagement, outdated storage infrastructure,
inefficiencies across the sector, and the influx of Syrian refugees have increased water stress
and water scarcity. Currently, the Ministry of Energy and Water (MoEW) is largely understaffed
and past attempts to reorganize managing bodies have fallen short. The confluence of these
factors has left most of the country to rely on costly private distribution networks. Further, tap
water is not safe to drink. The development of the water sector and related transportation
infrastructure is crucial to the future diversification of the Lebanese economy.
While Law 221 (2000) reformed the governance of the water sector, creating four regional
water authorities under the supervision of the MoEW, this restructuring has not been
successful and mismanagement still runs rampant. Outdated storage facilities lead to leaks
and lost water, and Lebanon’s karst topography makes leakage from artificial reservoirs
common. Further, of the 12 planned dam projects as of 2015, only two are operational
today: the Qaraoun dam and the Chabrouh dam. While there are laws that govern well
digging, it is estimated that 80 percent of wells in Lebanon were dug illegally, diminishing
the supply from public wells. In the agriculture sector, which accounts for 61 percent of the
country’s water usage, inefficient irrigation practices are another cause for concern. All these
inefficiencies equate to a colossal waste of water, and efforts must be taken to upgrade
storage facilities, and transport networks, and rethink current practices regarding pricing
and distribution.
Beyond inefficiencies and mismanagement, a flat rate is charged for water usage that does
not reflect actual consumption. There is consequently little incentive to conserve water, and
there is a lack of public awareness about water conservation.
The last national water strategy, drafted in 2010, is outdated and must be altered to address
the current challenges in the sector. The construction and maintenance of an efficient water
distribution system would improve delivery to citizens. It is imperative to upgrade storage
facilities and existing delivery systems and networks.
POLICY PRIORITY 9.1
UPDATE WATER STRATEGY AND SECTOR GOVERNANCE
Main Challenges
Proposed Measures
•
Measure 9.1.1
Create a more coherent Water Master Plan, building on the National Water Sector Strategy
(2010) and reassess water infrastructure projects for politically-induced projects, e.g. dams.
•
•
•
Create a coherent national
plan with the participation
of the Lebanese public
Define organizational
structure of governing
entities
Revise current water
pricing regime
Explore hydropower options
Measure 9.1.2
Follow up on the consolidation of the regional water authorities and define their
organizational structure and mandate. Increase coordination between the Regional Water
and Wastewater Establishment, the MoEW, and other relevant government agencies.
Measure 9.1.3
Modernize existing hydropower generation units and study potential for additional
power generation, taking into account development plans and ecological needs.
31
EXECUTIVE ECONOMIC ROADMAP
Executive 2019-2020
Strategize
Agenda Priority 9
Measure 9.1.4
Reassess the current pricing scheme and introduce a new water tariff regime that is
connected to the actual usage of water by the consumer. To do this, water metering
must be implemented throughout the country.
Measure 9.1.5
Support and modernize water-based energy plants and identify other opportunities to
generate power.
POLICY PRIORITY 9.2
MAXIMIZE EFFICIENCY ACROSS THE SECTOR TO REDUCE LOSSES
Main Challenges
Proposed Measures
•
Measure 9.2.1
Revise all licenses granted to mineral water firms and introduce quality control and
regulatory criteria. Manage all drinking water companies under this regime.
•
•
•
Improve access to drinkable
water through licensing,
distribution, and health
regulations
Upgrade storage facilities
and water transport
infrastructure
Enforce laws regarding well
digging
Increase efficiency in the
agriculture sector
Measure 9.2.2
Assess and strategize optimal efficiency of water transport infrastructure.
Measure 9.2.3
Review and assess the capacity of the existing water distribution systems in urban and
rural centers to reduce waste and transport costs, and improve usage efficiency.
Measure 9.2.4
Assess and optimize efficiency of water use by factories and industry.
Measure 9.2.5
Ensure continuous access to quality water by enforcing the prohibition of illegal well
drilling, and incentivize efficient management of groundwater resources in urban and rural
settings. Reduce extraction from private wells and ensure responsible usage of
public wells.
Measure 9.2.6
Mandate relocation of all water-intensive industrial processes into specifically
designated industrial zones.
Measure 9.2.7
Assess and optimize efficiency of water use by farms and the agricultural sector.
Reduce inefficiencies in the agriculture sector by increasing the usage of more
efficient irrigation systems, such as drip irrigation.
Measure 9.2.8
Research, design, and launch a public awareness campaign that teaches conservation
in schools.
32
executive-magazine.com
Strategize
Agenda Priority 10
STRATEGIZE TRANSPORT
In the second half of the 20th century—while Lebanon was in the throngs of internal
strife—the diversity, intensity, and overall importance of global trade increased
tremendously. All mobility categories—land, sea, and air—benefited from technical
innovations that ranged from the rise of container shipping and efficiency gains in
commercial aviation to the introduction of electric, alternative mobility, and sharing
solutions in landbound and urban transport. Having remained partially isolated from new
transportation developments during the civil war (1975-1990), Lebanon has, in the three
post-conflict decades, failed to catch up—achieving only partial inclusion in recent global
transportation sector developments.
Missed opportunities for reaping greater economic and social benefits relate to
infrastructure and operations across all modes of transportation. This translates into lost
economic benefits thanks to the sub-optimal utilization of the country’s geographic location,
which gives it an advantage in areas such as commercial shipping. Additionally, transportation
infrastructure inefficiencies have obstructed the realization of tourism potentials in a variety
of segments, from religious and ecological to leisure and cultural tourism, and have also
limited Lebanon’s potential as an aviation hub. Moreover, inefficiencies and infrastructure
problems in domestic mobility, as well as over-reliance on individual and quasi-individual
transport in and between urban centers, are contributing to social risks (for example, medical
and environmental) and to high direct losses and opportunity costs in the economy (due to
traffic congestions, above-average vehicular damage incidents, etc.).
To address its weaknesses in all modes of transportation, Lebanon must develop maritime
and aviation transportation infrastructure, motorways, secondary roads, urban transport
nodes, and rail networks. Improvements to domestic mobility infrastructures—such as
internally linking Lebanese ports and cities, and externally improving connections to
neighboring countries—would not only create important direct revenues and translate
into indirect opportunities for economic gains in inbound tourism and regional transit
trade, but also make Lebanon a regional transit hub in the Eastern Mediterranean. The lack
of a coherent strategy for cross-border and national transport in general, and the absence
of plans for more specific domestic needs, such as preventive maintenance of inter-urban
and urban mobility infrastructures throughout the country, has been identified as a drag
on the Lebanese economy. Knowledge of the insufficient and fragmented allocation of
funds to transportation infrastructure developments makes it even more important to
strategize mobility and transportation as one pillar of a national economic plan.
POLICY PRIORITY 10.1
DEVELOP A TRANSPORT POLICY FOR NATIONAL
AND CROSS-BORDER MOBILITY
Main Challenges
Proposed Measures
•
Measure 10.1.1
Develop a comprehensive national policy for sustainable transportation that will
regulate passenger and freight transport by road, sea, and air, and incentivize the
development of public transportation in both urban and rural areas. Policy will address
•
Reinvent public transport:
intercity and intracity
Enable maritime, air, and
commercial transport
33
Executive 2019-2020
EXECUTIVE ECONOMIC ROADMAP
Strategize
Agenda Priority 10
critical issues facing the sector such as road traffic congestion and the environmental
and health impacts of road transport, taxi and bus service licensing, trucking
operations and safety issues, public parking, and implementation mechanisms for all
provisions of traffic Law 243 (2012).
Measure 10.1.2
Prioritize intracity transportation development with a strong public transport
component for Greater Beirut, including an intracity public bus service network
proposed by the Railway and Public Transit Authority (RPTA) of the Ministry of Public
Works and Transport (MoPWT), and an intra and intercity rapid bus service proposed
by the World Bank under the $295 million Greater Beirut Public Transport Project
that was adopted as Decree 66 (2017) by the Council of Ministers and approved by
Parliament in June 2019.
Measure 10.1.3
Enhance intercity public transport by expanding bus transport networks and
rehabilitating the railway line between Beirut and Tripoli.
Measure 10.1.4
Develop frameworks organizing commercial transport and integrating all Lebanese
ports and airports into advanced digitized traffic management systems and modern,
durable traffic networks.
Measure 10.1.5
Improve urban mobility through the designation of bus lanes and the demarcation of
routes for those using alternative modes of transport especially dedicated bike lanes
that facilitate bike riding to work in urban centers, as well as on a municipal level and
between Beirut and major cities.
Measure 10.1.6
Implement advanced toll road and traffic guidance schemes for highways outside
of Greater Beirut that can satisfy requirements for the control of traffic flows and
the mitigation of accident risks, and that can also generate revenue to finance road
maintenance.
Measure 10.1.7
Develop Rene Mouawad Air Base as a commercial airport, and link the terminal to the
Tripoli Seaport and the planned Tripoli Economic Zone via a rail and road network.
Measure 10.1.8
Rehabilitate the Tripoli-Abboudieh (Syrian border) freight rail line and construct an
extension link to the port of Tripoli.
34
executive-magazine.com
Strategize
POLICY PRIORITY 10.2
IMPROVE URBAN MOBILITY AND THE ENVIRONMENTAL
COMPATIBILITY OF TRANSPORT
Main Challenges
Proposed Measures
•
Measure 10.2.1
Empower the national police force and municipal police departments to strictly
enforce Law 243 (2012) on traffic regulation by installing speed cameras at major
intersections and on highways. Amend the law to penalize littering and automate
the public safety monitoring and enforcement mechanism for the prosecution of
traffic violations.
•
•
Develop standards and
ethics in enforcement of
transportation behavior
Enforce driving codes and
public parking
Incentivize environmentally compatible modes of
transport
Measure 10.2.2
Develop the ethics of traffic control officers, whether municipal or national police,
and incentivize ethical behavior by introducing performance metrics and a feedback
mechanism for motorists.
Measure 10.2.3
Introduce build-operate-transfer (BOT) financing for underground public parking
projects, to be covered at the ground level by greenery and gardens or other public
spaces that meet environmental, urban planning, and urban living standards in cities.
Standardize rates for long-term and residential parking.
Measure 10.2.4
Regulate the valet parking industry and impose heavy penalties on restaurants whose
valets monopolize residential parking spots or drive unsafely.
Measure 10.2.5
Require all municipalities and authorities supervising highways to uphold road
safety maintenance in every sense, including: the upkeep of security barriers, the
development and maintenance of signage, and the upgrading of road surfaces.
Measure 10.2.6
Require municipalities to develop and accommodate safe pedestrian environments,
by, for instance, clearing sidewalks and enforcing their use for pedestrian traffic
by removing vehicles and other structures that impede pedestrian movement on
sidewalks. Municipalities must impose and enforce pedestrian right-of-way in all urban
areas with zebra crossings and places for pedestrians to cross major thoroughfares, in
order to improve walkability and safety.
35
Executive 2019-2020
EXECUTIVE ECONOMIC ROADMAP
Strategize
Agenda Priority 10
Measure 10.2.7
Protect mobility of pedestrians and secure zones with special rights for traffic
participants with impaired mobility. Develop infrastructure for rentable e-bikes and
protect pathways reserved for non-motorized users, such as bicycles or persons
pushing baby strollers.
Measure 10.2.8
Exempt from customs and excise taxes, registration, and road usage fees on all new,
fuel-efficient and alternative-fuel compact cars, with the aim of shifting toward
smaller, less-polluting vehicles.
Measure 10.2.9
Provide private households with incentives for adopting less-polluting modes of
transport, through measures ranging from tax rebates for buyers of electric vehicles
and daily users of public transport, to increases in annual road taxes for old and
polluting vehicles. Incentivize private vehicle owners to replace old, polluting vehicles
with new vehicles that comply with advanced emission standards.
Measure 10.2.10
Replace all existing gasoline and diesel buses with newer model bus technologies
running on clean fuels, such as natural gas and electricity, with the needed refueling
and recharging infrastructure.
36
executive-magazine.com
Combat
Agenda Priority 11
COMBAT GENDER INEQUALITIES
AND GENDER-BASED VIOLENCE
Violations of women’s rights are not just detrimental to society, human rights, and
the dignity of women, but are also extremely damaging to a country’s prospects
for sustainable economic development. Lebanon has made some inroads toward
correcting the injustices inflicted on women, but substantial work is still needed.
Lebanon has a reputation for openness, liberties, and freedom, but in reality the
country lags behind others in the region, such as some North African Arab states
that have introduced laws that have considerably improved the social and economic
status of women. There are some positive indicators concerning Lebanese women’s
level of education and engagement in decision-making positions (namely in the
judicial and public administrations), but these do not reflect their real status or
participation in the labor force, their role within the family, or the general attitude
of society—attitudes that are not only problematic for gender equality but also
for gender or sexual orientation. Lebanon still lacks proper civil laws guaranteeing
equal rights for women, and there are various legal constraints that discriminate
against women at home and work. Societal attitudes and perceptions continue to
subordinate women, suppressing their innovation, creativity, productivity, and—most
importantly—their basic freedoms. Lebanon still has reservations about some major
international conventions—such as the Convention on the Elimination of All Forms
of Discrimination Against Women (CEDAW)—and has yet to reform domestic laws,
change unfair customs (e.g., unequal employment opportunities and family status
laws), and combat gender-based violence (GBV), including harassment in schools,
universities, and the public and private spheres. There are insufficient laws protecting
the rights of women, and insufficient institutional support when women are facing the
judiciary. Lebanese laws must be brought in line with international conventions, and
stakeholders must work together through a grassroots campaign to cement equality
in practice. Empowering women is not only a fundamental social and human right, but
also a pillar of sustainable economic development—we need gender equality at all
levels to develop the country further.
POLICY PRIORITY 11.1
REFORM LAWS TO FOSTER PROTECTION FOR WOMEN
Main Challenges
Proposed Measures
•
Measure 11.1.1
Amend and reinforce the operationalization of Law 293 (2014) related to protection of
women and all family members from family violence.
•
•
Enforce legislation designed
to protect women
Provide additional legal and
social protections and costeffective quality service for
victims of GBV
Adopt, without reservations,
international conventions on
women’s rights
Measure 11.1.2
Support and develop projects with civil society to influence attitude and behavioral
change on women’s issues (e.g., wage gap, personal status, sexual harassment in
the workplace and public spaces) and to train and support women for merit-based
advancement in the workplace and in political life.
37
Executive 2019-2020
EXECUTIVE ECONOMIC ROADMAP
Combat
Agenda Priority 11
Measure 11.1.3
Mandate by law a further increase in parental leave—maternity and paternity—allow
flexible work schedules for parents and advocate for child-friendly spaces/nurseries in
the workplace.
Measure 11.1.4
Introduce new legislation or amend the criminal code to outlaw and increase
sentences against sexual gender-based violence (e.g., marital rape, incestuous rape,
sexual harassment). Adopt a unified civil personal status law, guaranteeing gender
equality that is compliant with the constitution and the international commitments of
Lebanon.
Measure 11.1.5
Lebanon has adopted CEDAW, but maintains reservations about some articles.
Lebanon should adopt CEDAW in its entirety, without reservations. The Optional
Protocol, which was included as an addendum to CEDAW, has still not been adopted
by Lebanon. Additionally, UN Security Council Resolution (UNSCR) 1325 on women,
peace and security must be integrated into state legal and regulatory policies to better
protect women during and after armed conflicts. Hence, operationalization/rollout of
the June 2019 national action plan on UNSCR 1325 must be prioritized.
Measure 11.1.6
Review and create the most feasible institutional setup that can serve for protection
and advancement of women in the context of Lebanese budget constraints.
Measure 11.1.7
Support existent women’s emergency safe shelters across the country to provide
standardized-quality, safe temporary accommodation in which women along with
their children can seek life-saving refuge and receive specialized help in crisis situation.
Measure 11.1.8
Amend Decree 15 (1925) on Lebanese nationality to ensure that children and spouses
of Lebanese women have the same right to citizenship as those of Lebanese men.
Measure 11.1.9
Abolish Article 534 from the Lebanese penal code. Article 534 compromises the
safety and protection of LGBTQ individuals and groups by subjecting them to physical,
psychological, and economic harm.
38
executive-magazine.com
Combat
Combat
POLICY PRIORITY 11.2
EMPOWER WOMEN AND ENCOURAGE PARTICIPATION
Main Challenges
Proposed Measures
•
Measure 11.2.1
Put in place systems to provide women with a path to leadership positions in public
and private institutions. For example, staffing police departments with trained
policewomen and social workers to provide assistance and protection against any kind
of harassment, discrimination, and GBV. Protect and encourage structural and societal
changes to make this possible.
•
•
Build professional
capacities of women
Provide opportunities
for women to increase
technical and life skills
Implement programs that
promote economic reform
and empowerment
Measure 11.2.2
Introduce capacity building and code of conduct measures to train judges, lawyers,
and journalists/media personnel on gender and GBV issues, international conventions,
and cultural discrimination.
Measure 11.2.3
Offer specialized training/soft skills building to women to foster their competitive
employability opportunities in the labor market.
POLICY PRIORITY 11.3
INCREASE THE NUMBER OF WOMEN IN LEADERSHIP ROLES
Main Challenges
Proposed Measures
•
Measure 11.3.1
Establish a ministerial committee with additional stakeholders from the judiciary,
private sector, and civil society to develop and monitor the progress of a national plan
aimed at women’s empowerment.
•
Remove social barriers
that prevent women from
accessing leadership roles
in their homes and the
public and private sector
Ensure women are not
discriminated against
in political and business
appointments
Measure 11.3.2
Ensure political appointments are merit-based, and that women are not excluded
from being considered for these roles on the basis of sex.
Measure 11.3.3
Encourage the private sector to appoint women to senior posts by increasing awareness
of women’s equal leadership capabilities through public awareness campaigns.
39
EXECUTIVE ECONOMIC ROADMAP
Executive 2019-2020
Combat
Agenda Priority 11
COMBAT POVERTY
Targets to eradicate extreme poverty and hunger were ranked as goal number
one when the global community adopted the Millennium Development Goals
(MDGs), at the United Nations, in the September 2000 Millennium Declaration.
Accomplishments toward poverty eradication—such as the reduction of extreme
poverty rates by more than half when comparing 2015 to 1990, and the reduction of
undernourishment by almost half in the same period—encouraged UN member states
to declare ending poverty “in all its forms everywhere” as Sustainable Development
Goal 1 (SDG 1) in September 2015. Poverty data in Lebanon is insufficient but a high
increase in incidents of poverty have been predicted for 2020 (post the mid-October
2019 economic crisis). The 2018 SDG progress evaluation report notes, “While
extreme poverty has eased considerably since 1990, pockets of the worst forms of
poverty persist. Ending poverty requires universal social protection systems aimed
at safeguarding all individuals throughout the life cycle. It also requires targeted
measures to reduce vulnerability to disasters and to address specific underserved
geographic areas within each country.” While other agendas pushed by special
interest groups in politics, business, or civil society may be controversial in the
national debates of many countries, the validity and urgency of SDG 1 is undisputed
by the global community. Lebanon is generally understood as needing to make more
progress toward the implementation of SDG 1 by the SDG target year, 2030. Due to
fiscal, monetary, or political constraints, successive Lebanese governments have failed
to devise a comprehensive social safety net plan, dumping most of the workload on
NGOs and international donors, and intervening only to meet the bare minimum of
needs, with limited resources allocated to line ministries. Lebanon’s government must
detail policy on human and social development in its Ministerial Declaration, with
clearly defined objectives and concrete proposals, as well as timelines for poverty
reduction. The exploration and expansion of poverty reduction efforts on the national
level deserve the attention of political stakeholders, civil servants, and elected officials,
but also need support from religious institutions (as the traditional providers of
poverty alleviation in Lebanese communities), wider civil society (including charitable
and humanitarian non-governmental organizations), and private sector individuals
and institutions (from schools and microfinance institutions, to manufacturers and
banks). The years since the adoption of the MDGs and SDGs have witnessed increasing
participation of private sector businesses, with the rise of corporate citizenship or
corporate social responsibility (CSR). This commitment of the private sector needs to
be maintained even as the economic restraints of a contraction in GDP are anticipated
for 2020. Evaluation, encouragement, and further development of public and private
sector efforts toward the achievement of SDG 1 must be integral to the process of
designing any plan for the Lebanese economy.
40
executive-magazine.com
Combat
POLICY PRIORITY 12.1
TARGET AND SUPPORT THE EXTREME POOR
AND THE DISADVANTAGED
Main Challenges
Proposed Measures
•
Measure 12.1.1
Rapidly advance development of the National Social Protection Policy.
•
•
Address the lack of a
poverty eradication strategy
for Lebanon
Modernize the legislative
framework
Protect vulnerable
population groups against
modern slavery
Measure 12.1.2
Immediately expand coverage and effectiveness of existing social safety nets such as
the National Poverty Targeting Programme.
Measure 12.1.3
Establish a permanent ministerial committee, including participants from civil society
and international development organizations, to develop and implement a poverty
reduction strategy.
Measure 12.1.4
Create/empower a poverty eradication task force that links together members of
Parliament and parliamentary committees whose purviews include working on
populations that are vulnerable to poverty (e.g., women and children, displaced and
refugees, disabled or aged persons, and all those in need of medical support).
Measure 12.1.5
Legislate, adopt, and finance, with the collaboration of the development partners,
Office of the Prime Minister, the Central Administration of Statistics, and the Ministry
of Social Affairs, direct support schemes for the poor in all categories mentioned in
Measure 12.1.4.
Measure 12.1.6
Combat illegal child labor and trafficking, and the abuse of children, by cracking down
on violators.
Measure 12.1.7
Implement (i.e., pass implementation decrees for) the ratified law on disability.
41
EXECUTIVE ECONOMIC ROADMAP
Executive 2019-2020
Combat
Agenda Priority 12
Measure 12.1.8
Align legal and operational frameworks for poverty eradication with frameworks for
labor (Agenda Priority 17) and health strategy (Agenda Priority 7).
Measure 12.1.9
Develop contingency and emergency response plans for economically induced
shortages in food, shelter, medical services, etc.
POLICY PRIORITY 12.2
DEVELOP FISCAL AND PRIVATE SECTOR FINANCIAL
MECHANISMS FOR THE SUPPORT OF THE POOR
Main Challenges
Proposed Measures
•
Measure 12.2.1
Develop mechanisms to alleviate poverty in old age by improving social security and
health or medical care provision schemes for those above 65.
•
•
•
•
Ensure safety nets exist for
those below the poverty line
Expand and modernize
existing rudimentary social
security
Upgrade safety nets for
dealing with poverty in old age
Implement targeted support
schemes and microfinance
Improve NGO financing
legislation to ease ability to
donate
Measure 12.2.2
Improve economic mobility by targeting and enabling financial inclusion and by
providing incentives to the poor to enroll in nano and microfinance schemes.
Measure 12.2.3
Incentivize organizations in the microfinance institutions sector to further extend their
reach, including building on updated regulations and the increased financing options
made possible by 2018 circulars from Banque du Liban (BDL), Lebanon’s central bank.
Incentivize use of digital tools, such as mobile applications, in the provision of services
of microcredit, microsavings, and microinsurance.
Measure 12.2.4
Make corporate and personal donations tax deductible for those who donate to
qualifying public utility organizations, charities, and NGOs.
42
executive-magazine.com
Combat
Agenda Priority 13
COMBAT CORRUPTION
Corruption—defined in this case as the misuse of public posts for personal gain—is a
popular and recurring talking point in Lebanon. It regularly finds its way into political
speeches, media reports, street demonstrations, and the day-to-day small talk of
the Lebanese at home and abroad. Corruption in Lebanon is perceived as pervasive.
Meanwhile, international research into corruption indicates that grand and petty
corruption—meaning incidents involving large spending measures on a national and
sub-national level as well as citizens’ inability to obtain services without “greasing
the wheels” when dealing with public servants—can significantly distort economic
performances at the national as well as individual level. Citizens and political leaders
have long been emphasizing that something must be done in Lebanon to curb these
forms of corruption. Despite many years of complaints from citizens and lipservice
from politicians, up until the fourth quarter of 2019 very little was done to achieve
concrete progress in this regard, let alone engage in serious dialogue on wider issues
of corruption such as nepotism and communal favoritisms. Instead, corruption has
been discounted in public discourse as someone else’s vice. When public figures
were confronted with evidence implicating them, the standard response was political
manipulation against the backdrop of prevalent public complacency (“Everybody else
is doing it!”). This chronic lack of self-reflection and systemic inaction was enabled by
a combination of factors, all of which have in 2019 been challenged by the Lebanese
polity. Instead of serious legal loopholes, persistent institutional failures, blatant political
interference, and the systemic exploitation of confessional and regional identities,
the seachange of the civil protests in Lebanon at the end of 2019 has done its utmost
to destroy the state of impunity that fueled corruption and sent the wrong message
to Lebanese society and the world at large. After baby steps in the right direction of
reducing corruption in the past two years before the thawra (revolution), new anticorruption forces have come into existence and the pursuance of decisive measures
in the fight against corruption has become possible. Steps that include the passage
of laws (e.g., access to information) after more than a decade-long process and the
announcement of the country’s first national anti-corruption strategy after nearly seven
years of incremental work behind the scenes need to be empowered so that they can
induce a tangible change for Lebanon. Barriers that still hinder the combat against
corruption, such as the country’s poor law enforcement, and the fact that the national
strategy has not been formally adopted, or provided with the necessary financial and
human resources, are now in closer reach and can be challenged decisively.
43
EXECUTIVE ECONOMIC ROADMAP
Executive 2019-2020
Combat
Agenda Priority 13
POLICY PRIORITY 13.1
PROMOTE AND INCREASE TRANSPARENCY
Main Challenges
Proposed Measures
•
Measure 13.1.1
Support and regularly monitor compliance with Law 28 (2017) on access to
information, including the appointment and training of information officers in all
administrations and the publication of all information required by the law.
•
•
Increase ease of access to
information
Uphold international
agreements against
corruption
Modernize legislation on
the declaration of wealth
Measure 13.1.2
Set up an independent permanent committee grouping governmental and nongovernmental experts to track and publicly report on Lebanon’s implementation of the UN
Convention against Corruption and make recommendations for enhanced implementation.
Measure 13.1.3
Adopt and support the effective implementation of legislative amendments that
modernize the country’s system for the declaration of wealth by public officials to make
it more efficient, and ensure that the declarations are submitted periodically, made
more comprehensive, and are able to be audited for completeness and correctness.
Measure 13.1.4
Establish and train a working group in each administration to regularly assess
corruption risks created by the lack of transparency in procedures and costs,
and to propose ways to mitigate those risks, with an annual progress report
aggregated by the Office of the Prime Minister for all administrations. Submit the
report to the public.
POLICY PRIORITY 13.2
STRENGTHEN LEGAL AND JUDICIAL
ANTI-CORRUPTION FRAMEWORKS
Main Challenges
Proposed Measures
•
Measure 13.2.1
Amend Law No. 154 (2009) on anti-illicit enrichment to introduce a proper definition
of crimes such as graft, grand theft by public officials, embezzlement, influence
peddling, and other variants of political corruption, in line with the UN Convention
against Corruption, and legislate adequate sanctions and judicial prosecution
and enforcement mechanisms, while also eliminating barriers for triggering and
conducting related investigations.
•
•
•
44
Define crimes and sanctions
for specific forms of corruption
Revise banking secrecy rules
Improve alignment of
government procurement,
tendering, and project
awarding processes with
anti-corruption priorities
Increase punishments for
those who are caught in
corrupt behavior
executive-magazine.com
Combat
Measure 13.2.2
Amend the laws and regulations necessary to lift bank secrecy on Lebanese public
officials, including the president, members of Parliament, ministers, judges, ranking
public servants, and their relatives.
Measure 13.2.3
Finalize and adopt the law on conflict of interest, including the establishment of a
national committee that reviews existing and proposed legislation and sets limits and
regulations of potential conflicts of interests.
Measure 13.2.4
Make all requests for proposals and tendering processes related to projects and
contracts transparent to the public; they should include the clauses of the final
contract to be signed.
Measure 13.2.5
Speed up the implementation of Law 83 (2018) on whistleblower protection and
adopt the needed regulations and complementary legislation to bring it into force,
including the establishment of a national anti-corruption agency.
Measure 13.2.6
Amend laws and regulations that will help to combat the petty corruption of
civil servants and municipal officials, and improve protection and verification of
whistleblowers who expose instances of petty corruption.
Measure 13.2.7
Introduce transparency and accountability measures in all public-private partnership
(PPP) contracts and arrangements, including the establishment of independent
project-based audit committees to ensure compliance with those measures.
Measure 13.2.8
Establish and maintain a portal, supported by a mobile application, to publicly report
in a timely manner on the receipt and expenditure of all international funding for
projects that will be financed by contributions made through CEDRE.
Measure 13.2.9
Legislate links between serious corruption convictions and restrictions on convicted
persons or judicial persons in their ability to hold positions of public office, participate
in government procurement, or bid for governmental and PPP contracts and projects.
45
EXECUTIVE ECONOMIC ROADMAP
Executive 2019-2020
Combat
Agenda Priority 13
POLICY PRIORITY 13.3
IMPROVE INSTITUTIONAL AND SOCIETAL
RESILIENCE AGAINST CORRUPTION
Main Challenges
Proposed Measures
•
Measure 13.3.1
Maintain existing anti-money laundering (AML) policy at Banque du Liban (BDL),
Lebanon’s central bank, and introduce a random investigation mechanism of accounts
and transactions.
•
•
Improve institutional
control mechanisms in the
fight against corruption
Enhance integrity of public
and private sectors
Create anti-corruption
interface tools between the
public and private sectors
Measure 13.3.2
Provide the Central Inspection Bureau and the Audit Bureau with IT systems to track complaints
and files from beginning to end, and double the number of their inspectors and auditors
respectively, while providing them with certifiable training and proper financial incentives.
Measure 13.3.3
Set up an independent national corporate governance program for private sector
companies. This program should be aligned with international best practices and
incentivize those corporations that adopt and adhere thereto.
Measure 13.3.4
Require corporate staff and civil servants to take part in regular awareness raising and
training, prepared in coordination with civil society and international organizations.
Measure 13.3.5
Launch a program that educates adult citizens on methods to identify corruption,
whistleblower responsibilities and protections, and channels for raising corruption
concerns. Develop new channels through which citizens can alert judicial and
administrative authorities to suspected incidents of corruption, and empower forums and
mechanisms where anti-corruption organizations in civil society can advise citizens and
take corruption-fighting actions in their support.
Measure 13.3.6
In educational institutions, from schools to tertiary education providers, strengthen
curricula and programs that range from awareness building on the negative social impacts
of corruption in civil education curricula to dedicated programs to train students to
become experts in compliance with anti-corruption and governance mechanisms.
Measure 13.3.7
Implement and empower programs and forums to incentivize citizens who demonstrably
practice behavior indicating civil integrity—challenging or counteracting incidents of
petty corruption and societal corruption in their community, for instance—and institute
programs that further encourage and reward exemplary behaviors.
46
executive-magazine.com
Combat
Agenda Priority 14
COMBAT POLLUTION
Pollution in Lebanon is pervasive. The air and water are contaminated and noise levels
are high as a result of heavy traffic, reckless driving, and unregulated noise levels for
bars and clubs. For a resident of Keserwan, acid rain has become part of everyday life,
thanks to the Zouk power plant; for a resident of greater Chekka, the likelihood of
developing asthma or allergies is increasing.
Car emissions, in particular from red diesel-powered vehicles, are a primary source
of pollution, despite a law prohibiting this diesel’s use. The law must be enforced and
should be amended to remove the exemption for commercial vehicles or agriculture
machinery. Lebanon also suffers from a waste management crisis. The country dumps
its waste at facilities located along the seashore, polluting the water. This has health
consequences for humans and marine life, and, among other effects, has had negative
impacts on the country’s fishing industry. Open air dumps destroy Lebanon’s natural
beauty, contaminate drinking water, and threaten the environment and wildlife, while
the burning of garbage fills the air with contaminates that make life unbearable for
residents living nearby. Even though Lebanon is not a country with highly polluting
industrial activities or resource extraction as bases of the economy, the lack of
environmental protections against illegal industrial practices, quarrying, construction,
and real estate development activities has exacerbated the country’s trouble with
maintaining minimal environmental integrity and quality of life for its population.
The degradation of environmental integrity, the violation of common sense and
legal standards on environmental preservation and industrial pollution, the impunity
of many individual and corporate violators, and the excessive overuse or profitseeking impairment of scarce natural resources—such as intact forests and small
ecosystems—have contributed to increasing direct and indirect costs to the Lebanese
population. These costs can be seen in the proliferation of chronic medical conditions,
such as cancers and respiratory diseases, and in negatively impacted economic
activities, such as tourism.
Over the last 25 years, Lebanon’s environment has suffered rapid degradation—from
the seashore to the mountain top—as well as the destruction of many symbols of
Lebanese heritage. It is ironic when one considers that, in many ways, Lebanese
citizens and companies, blinded by easy money, share the blame with the politicians
and government entities that fail to punish those who violate environmental
protection regulations. The number of traditional homes and buildings in major
cities is dwindling. In fact, neighborhoods are being erased and replaced by vertical
structures, and there are few public spaces in the capital. Lebanon’s environment
is, put plainly, in a catastrophic state, and partial or ad hoc measures to change this
trajectory will not suffice. The government must declare the state of the environment
a national emergency, and devise, adopt, and enforce relevant legislation. Public and
private stakeholders need to stand united in the fight against pollution.
47
EXECUTIVE ECONOMIC ROADMAP
Executive 2019-2020
Combat
Agenda Priority 14
POLICY PRIORITY 14.1
COMBAT AIR AND WATER POLLUTION
Main Challenges
Proposed Measures
•
Measure 14.1.1
Adopt and enforce legislation regulating acceptable fuels for use in vehicles, and
introduce incentives for adoption of less polluting vehicles.
•
Nudge, incentivize, and
penalize citizens and
households to encourage
a shift from polluting to
virtuous environmental
behaviors in their daily lives
Improve and enforce
corporate and micro,
small and medium-sized
enterprises’ behaviors
that comply with
existing legislation and
international standards
Measure 14.1.2
Incentivize the purchase of eco-friendly cars and penalize usage of highly polluting or
energy-inefficient vehicles, through means ranging from technical requirements and
inspections to taxation tools.
Measure 14.1.3
Incentivize households to reduce consumption of fossil fuels and use low-energy
devices and/or alternative power in heating, air conditioning, and personal mobility.
Measure 14.1.4
Take efforts to minimize household waste through cost-recovering waste collection
fees and by introducing financial incentives and campaigns that encourage sorting
at source and recycling. Encourage customers to use reusable eco-friendly bags
in supermarkets. Impose a green tax (a small fee) on usage of plastic bags in
supermarkets and other retail outlets, and place a tax on elaborate and wasteful
packaging.
Measure 14.1.5
Adopt legal codes setting specific and adequate standards for limiting and regulating
emissions and solid waste generation across all industries.
Measure 14.1.6
Outlaw quarries permanently, and revoke temporary licenses and special exemptions.
Measure 14.1.7
Apply and update real estate development rules and municipal building and zoning
codes to better reflect environmental preservation and cultural heritage preservation.
Enforce development regulations and real estate codes across Lebanon.
Measure 14.1.8
Require industrial producers to be located in licensed industrial zones that are
equipped for the treatment of pollutants generated by the occupants.
48
executive-magazine.com
Combat
Measure 14.1.9
Legislate and supervise the mandatory treatment of industrial waste, including
solid waste, effluents, and aerial emissions. Prescribe new methods of proper
collection and treatment, and penalize industrial violators with harsh and escalating
punishments, ranging from fines to company closures and the imprisonment of
noncompliant business owners and managers.
Measure 14.1.10
Legislate and implement workable waste treatment schemes, end the dumping of
waste in the sea, and enforce compliance with Lebanon’s international obligations.
Develop waste management solutions based on the reduce, reuse, and recycle
principle, and develop sanitary landfills for non-recyclable waste.
POLICY PRIORITY 14.2
COMBAT NOISE POLLUTION
Main Challenges
Proposed Measures
•
Measure 14.2.1
Introduce legislation regulating noise emissions from nightlife, private households,
garden parties, and other events that typically have a high noise level.
•
Regulate admissible noise
levels for noise emitters
Enforce prohibition
of fireworks outside of
regulated usage
Measure 14.2.2
Legislate permissible noise emission levels and, if applicable, times for operation of
construction machinery and water pumps in residential zones.
Measure 14.2.3
Enforce noise limits on motor vehicles and make the modification of vehicles with noiseincreasing devices illegal if those devices generate noise above set decibel limits.
Measure 14.2.4
Enforce the prohibition of fireworks outside of preset periods and special exemptions
for social events. Limit the sale of fireworks to adults and ban the risky use of
fireworks by children. Penalize the unauthorized use of fireworks by households or
event organizers and mandate municipal supervision and operation of fireworks in
urban centers and in residential areas.
Measure 14.2.5
Set up municipal hotlines for complaints against all kinds of noise pollution.
Measure 14.2.6
Train (and raise awareness) of police officers on noise pollution regulations and issue
fines to violators.
49
EXECUTIVE ECONOMIC ROADMAP
Executive 2019-2020
Combat
Agenda Priority 14
POLICY PRIORITY 14.3
STOP ENVIRONMENTAL DEGRADATION
AND PROMOTE GREEN LEBANON
Main Challenges
Proposed Measures
•
Measure 14.3.1
Preserve forested areas, outlaw any construction in areas ravaged by fires, and
regulate wood collection and charcoal production. Maintain firefighting equipment.
•
•
Revitalize existing public
spaces and create new ones
Preserve green parks and
forestry
Encourage municipalities
to introduce recycling
programs
Measure 14.3.2
Develop public parks, public spaces, and playgrounds, particularly in Beirut and
residential suburban areas. Provide tax credit to municipalities that secure green areas.
Measure 14.3.3
Provide incentives (tax credit) to households and private sector entities that recycle,
and to municipalities that introduce recycling plants or recycling programs.
Measure 14.3.4
Enforce laws protecting historic buildings and natural sites (e.g., certain
neighborhoods in Beirut, or the natural rock formations in the Keserwan-Faitroun
mountains), and introduce more barriers against the demolition of historic buildings
and natural sites.
50
executive-magazine.com
Develop
Agenda Priority 15
DEVELOP COMPETITIVENESS
Lebanon has been active in negotiating a large number of framework trade agreements
with Arab states, as well as Eastern European countries. However, trade agreements
have not gone beyond simple tariff reductions, which have been demonstrated by
economic literature to offer little to no gain. Moving to eliminate tariffs is not the main
objective: Non-trade barriers remain the main obstacle facing the flow of merchandise,
and these barriers have been erected by both Arab and EU trading blocs, which
constitute over 60 percent of Lebanese export destinations. Moreover, the liberalization
of agriculture and services, two sectors that are important to Lebanon and other
developing countries, has been put on hold by developed countries, starting with the EU
and more so by the imposition of trade wars in 2019.
At the multilateral level, Lebanon has held observer status at the World Trade
Organization (WTO) since 1999 but effectively launched the accession process in May
2001, as part of the Doha round of trade negotiations. The WTO can be seen as a
mechanism to protect small economies and to resolve international trade disputes, in
addition to ensuring that small economies are not marginalized in a globalized world.
Deeper integration offers dynamic long-term benefits and provides opportunities,
notably to developing economies with the potential to grow, such as Lebanon. However,
integration and harmonization under globalization require major reforms and efforts
to upgrade and improve efficiencies that are inherently costly, especially to sheltered
sectors or firms hidden behind protectionist measures.
The international trade liberalization process must thus be accompanied by internal
measures to increase competitiveness. Because the Lebanese economy is overwhelmingly
composed of micro, small, or medium-sized enterprises (MSMEs), any long-term plan to
promote economic growth must target MSMEs and include mise à niveau programs to
upgrade national competitiveness and enable local producers to penetrate foreign markets.
The factors behind the high cost of production and resulting lack of competitive edge
in Lebanon are many. A rise in the price of petroleum is a persistent danger as long as
the country depends wholly on oil and gas importation. However, the liquidity problems
experienced by Lebanese importers in context of pressure on the lira-dollar peg have taken
center stage in 2019. As lira devaluation implies more expensive imports (inputs), the high
cost of services (telephones, power, transport, etc.) coupled with an uncompetitive internal
market translate into economic inefficiencies and, therefore, above-market prices. All these
factors, and others, increase the burden on producers. In addition to revised monetary
policies such as a switch to a crawling peg, remedies for decreasing producer costs lie mainly
in major structural reforms, such as introducing competition or improving access to capital
for MSMEs. Importation tariffs and import substitution incentives appear to be mandated in
order to reduce trade imbalances in the short to medium term. However, competitiveness
needs to be developed in ways that are compatible with the international obligations and
trade agreements that have been signed by the Lebanese state and able to avoid pockets of
inefficient economic production. In the long term, protectionism and other state measures
to shelter domestic producers must be studied, wielded very cautiously and limited in size
and duration, lest they will cause more harm than good.
51
EXECUTIVE ECONOMIC ROADMAP
Executive 2019-2020
Develop
Agenda Priority 15
POLICY PRIORITY 15.1
MAINTAIN A FREE AND FAIR TRADE POLICY
Main Challenges
Proposed Measures
•
Measure 15.1.1
Set up a new inter-ministerial and sectoral committee, under the leadership of the
Ministry of Economy and Trade, to reassess and negotiate bilateral trade agreements
and examine protective tariffs that were instituted in 2019 as well as tariffs that
entered into discussion in the last quarter of 2019.
•
•
Reassess trade policy,
domestic and international
Negotiate new agreements
Improve interaction with
the European Union
Measure 15.1.2
Adopt legislation relating to WTO accession. Negotiate new agreements with the
GCC and emerging economies, such as Africa, China, and India, that go beyond
merchandise trade to include services, investment promotion, and natural resources.
Measure 15.1.3
Establish an EU unit that is linked directly to the Office of the Prime Minister and
includes representatives of all relevant ministries. Mandate this EU unit to strengthen
cooperation, stressing issues such as market access, transfer of know-how, and
regional infrastructure networking (e.g., electrical, maritime, etc.).
POLICY PRIORITY 15.2
UPGRADE THE COMPETITIVENESS OF THE NATIONAL ECONOMY
Main Challenges
Proposed Measures
•
Measure 15.2.1
Set up a committee grouping public and private sector representatives to develop a twoyear and five-year plan (mise-à-niveau programs) to improve competitiveness by identifying
targets and performance indicators.
•
•
•
•
•
52
Establish committee to
improve competitiveness and
enhance new comparative
advantages of exports
Reduce manufacturing costs
Ease access to markets
(e.g., port, airport, etc.)
Create the national board
for competitiveness
Identify and develop new
niche markets
Conduct foreign market
research and promote
exports
Measure 15.2.2
Seek to maximize comparative advantages related to changing monetary realities and
support export productivity gains through appropriate measures and incentives on the level
of manufacturing and agro-industry production.
Measure 15.2.3
Reduce the cost of manufacturing production temporarily by, for example, providing
solutions such as low power rates during off-peak hours for energy-intensive industries, or
other innovations that are not socially distortive.
executive-magazine.com
Agenda Priority 15
Develop
Measure 15.2.4
Set up an agency focused on export promotion and research in foreign markets, and in the
immediate term train staff and diplomats across the globe to promote Lebanese businesses.
Measure 15.2.5
Build the capacities of specialized Lebanese institutions, namely the standards entity
Lebanese Standards Institution and the Industrial Research Institute, to provide support
services to all industries and incentivize development to export-oriented enterprises.
Measure 15.2.6
Further revise legislation of exclusive agencies and implement stronger antitrust
legislation.
53
Executive 2019-2020
EXECUTIVE ECONOMIC ROADMAP
Develop
Agenda Priority 16
DEVELOP ENTREPRENEURSHIP SUPPORT
Since independence, Lebanon has adopted liberal economic policies whereby
market forces dictate the behavior of economic agents. During the country’s 15-year
civil war, state intervention in the economy increased, though often in a chaotic
manner. Instead of adopting a regulatory framework that facilitated investment and
encouraged growth, the state created obstacles for the private sector, imposing
a heavy burden on the fiscal budget, and indirectly reducing economic efficiency
and productivity. Over a quarter century after the war’s official conclusion, the
outcome for Lebanon can be summarized as follows: Economic infrastructures have
fallen behind, living standards have declined, poverty rates have increased, wealth
distribution has become polarized and inequitable, the economy has become less
diversified, markets have become dominated by oligopolies, the behavior of a large
number of agents has been marred by corruption, and the government has failed to
play its proper role as a visionary and a market regulator.
The Lebanese enterprise environment has been strung between the state’s underlying
concept of entrepreneurship in a free-market economy and the corruption of the
economy into fragmented silos with clientelistic structures under the control of
competition-distorting oligopolies.
After years of slow growth, the economy picked up from 2004 and into 2010, with an
average economic growth rate of 7 percent, only to suffer again from severe external
shocks that curbed growth and accelerated the rate of young talent leaving the
country—the brain drain.
Efforts to reinvigorate the Lebanese entrepreneurship potential—often referred to
in reports on the successes of Lebanese migrants and, more recently, in assessments
of the involvement of Lebanese individuals in tech entrepreneurship in the emerging
digital age—were kickstarted in the 2010s with Circular 331 issued by Banque du Liban
(BDL), Lebanon’s central bank, which aims to encourage and support the channeling
of deposits from commercial banks into knowledge economy ventures by way of
venture capital funds and intermediaries. However, by the end of 2019 new limitations
to the financing formula under Circular 331 became evident alongside a larger need
to review and further upgrade the entire tech entrepreneurship ecosystem. In this
context, new impulses for funding, development, and exits in the ecosystem are
urgently needed for 2020 and beyond.
For the Lebanese economy to leverage the growing entrepreneurship successes in
this ecosystem into wider gains—in the form of job creation, financial growth, capital
markets opportunities, and the transition into a digital economy that can compete
internationally—sustained efforts need to be further increased to develop knowledge
economy capacities, the tech entrepreneurship ecosystem, its financial and legal
support systems, and the encouragement of the entrepreneurial spirit of all Lebanese.
54
executive-magazine.com
Develop
POLICY PRIORITY 16.1
PROMOTE INNOVATION AND DIVERSIFICATION
Main Challenges
Proposed Measures
•
Measure 16.1.1
Integrate the entrepreneurship vision for Lebanon into the national economic vision
and enable capital-guaranteed funding for companies that meet predetermined
criteria in line with this vision.
•
•
Further develop the
knowledge economy
ecosystem
Improve access to financing
for new enterprises
Provide support to nascent
exporters that incorporate
digital technologies
Measure 16.1.2
Develop complementary projects to accompany and eventually succeed BDL Circular
331 and complete the knowledge economy building blocks across the country: set
up hackathons, pre- and post-accelerators, incubators, angel/seed and VC funds, and
provide mentorship and coaching.
Measure 16.1.3
Support increased links among actors in the Lebanese entrepreneurial environment,
particularly activate new international funding mechanisms for investment funds
based in Beirut, and incubators, chambers of commerce, and growing enterprises
nationwide, to enhance cluster development and promote investment in businesses
inside and outside Beirut.
Measure 16.1.4
Develop schemes to better subsidize pilot projects of new entrepreneurs and further
enhance coordination mechanism between universities, funding stakeholders, and
state entities (e.g., Euro-Lebanese Centre For Industrial Modernization and the
Industrial Research Institute) to support innovative ideas.
Measure 16.1.5
Support incubated and accelerated projects and new firms’ move from ideation
into phase two, enterprise building, by providing access to early-stage finance (seed
funding, angel investors) to successful graduating companies.
Measure 16.1.6
Provide incentives to first-mover firms with future-oriented technology that export
innovative and competitive tradable goods (meaning products or services not
previously exported by the firm or from Lebanon).
55
EXECUTIVE ECONOMIC ROADMAP
Executive 2019-2020
Develop
Agenda Priority 16
POLICY PRIORITY 16.2
STRENGTHEN LEGAL AND INSTITUTIONAL FRAMEWORKS
FOR ENTREPRENEURSHIP
Main Challenges
Proposed Measures
•
Measure 16.2.1
Provide fiscal incentives to firms that allocate budgets for research and development
(R&D).
•
Invest in research and
development
Strengthen intellectual
property protections
Measure 16.2.2
Incentivize R&D budgets in universities and encourage the creation of technology
transfer offices with grants to support spin-offs. Foster technology transfers between
universities and the private sector.
Measure 16.2.3
Facilitate broader reforms in the judicial and legal systems (bankruptcy law, private
equity and venture capital law, employee stock ownership plans, etc.), and continued
education programs for lawyers on investor protections.
Measure 16.2.4
Enforce intellectual property protection through better laws and regulations.
POLICY PRIORITY 16.3
WIDEN ECONOMIC REACH OF MICRO, SMALL AND MEDIUMSIZED ENTERPRISES
Main Challenges
Proposed Measures
•
Measure 16.3.1
Develop various schemes in support of MSMEs, such as revolving and guaranteed
funds that build on existing schemes such as the Kafalat and IM Capital equity
guarantee scheme and potentially incorporate new schemes.
•
•
Extend nascent support
frameworks for MSMEs
Link startups and MSMEs
to diaspora investors
Provide incentives
for participants of
microfinance institutions Measure 16.3.2
Create a one-stop-shop portal for MSMEs and startup entrepreneurs to access
information and inquire about financial support and other incentives for startups.
Measure 16.3.3
Facilitate access to advisory services, such as strategic and financial planning for
MSMEs. Legislate dedicated channels where MSMEs can bid for public procurement
opportunities and public project tenders.
56
executive-magazine.com
Develop
Measure 16.3.4
Integrate entrepreneurship and diaspora energy flows by activating diaspora channels
for international market access, and transfer of knowledge through mentorship or
coaching. Prioritize linkage of resources between diaspora and local entrepreneurs on
levels of investment and financing.
Measure 16.3.5
Continue capacity building with Lebanese customs authorities to increase
transparency and efficiency of customs processes and reduce barriers that hinder
growth of MSMEs.
Measure 16.3.6
Develop incentives for investors to participate in microfinance institutions, an
approach that has proved successful around the world and is profitable to the investor
and beneficial to the microenterprise.
Measure 16.3.7
Create a special legal form and structure for social enterprises. Introduce a means for
the incorporation of not-for-profit and social enterprises.
Measure 16.3.8
Subsidize programs and nonprofit cooperatives aimed at consolidating small farmer
communities and boosting their productivity.
Measure 16.3.9
Incentivize sector-specific funds in promising sectors, such as agro-food, film, and
media, and social impact enterprises.
Measure 16.3.10
Incentivize business associations and business chambers to strengthen governance
and types of business services, including information sharing to foster business
development and growth in targeted sectors and sharing of market information.
57
EXECUTIVE ECONOMIC ROADMAP
Executive 2019-2020
Develop
Agenda Priority 17
DEVELOP LABOR
Labor, described by economic historian Karl Polanyi in 1944 as a “fictitious commodity,”
is the lynchpin of any economy. As human capital is bound up in questions of justice,
prosperity, dignity, and national identity, the issue of labor intersects with many of the
agenda and policy priorities in this Economic Roadmap.
According to a recent international assessment of holistic wealth by the World Bank, human
capital constitutes Lebanon’s biggest wealth-generator. However, estimates of the size and
composition of the Lebanese labor market remain uncertain due to the lack of watertight
data. Likewise, labor policy, as well as projections of future Lebanese labor realities, needs,
and opportunities—in the context of rapidly evolving global digitization, or the digital
transformation of economies—leaves much to be desired. This makes it crucial to develop
our human capital and preparedness for the labor uncertainties of coming decades.
To understand already predictable risks, shore up responsive capabilities to unpredictable
elements, and enhance the supply of work, Lebanon needs to develop its knowledge base
on labor issues in the 2020s in order to maximize creation of sustainable jobs and minimize
losses to digital destruction of work. It may be best served in this by measuring the labor force
participation rate, and the gap between actual participation and potential participation. The
last official measurement of Lebanon’s unemployment rate, in 2007, settled on 9.7 percent.
However, the International Labour Organization (ILO) modelled unemployment at just under
7 percent in 2018, and unemployment for Lebanese youth (which the ILO defines as those
between 15 and 24), is estimated at almost 18 percent. Total labor participation by Lebanese
nationals older than 15, the portion that is defined as being economically active, stood at 47
percent, with the number of people in the labor force just above 2.2 million in 2018.
A labor issue with additional data uncertainty and many troubling implications is the
presence of exploitation and the very poor integration of temporary foreign labor
(which is linked to voluntary and involuntary migrations). Among the nearly 1 million
UNHCR-registered Syrian refugees, according to the Lebanon Crisis Response Plan
2017 (LCRP), an estimated 36 percent were unemployed. Meanwhile, the count
of non-nationals employed as “domestic workers” (providing services to Lebanese
households) was estimated in a 2018 study by Human Rights Watch at 250,000
persons. Although some limited coverage of the social insurance needs of domestic
workers is mandated under Lebanese law, domestic workers do not have access to
labor law protections and many social safety nets.
Determinants of current and future labor markets and processes—such as labor
unionization, collective bargaining, regulation of specific labor market admissions,
evolution of social insurance in reflection of social and human conditions (such as
increasing longevity)—are in need of new assessment. This assessment must be
completed before it is possible to develop a new national labor policy. Such a policy,
however, must be devised and function as the cornerstone of the sustainable future
of Lebanese labor, as much of the existing regulatory framework governing Lebanon’s
labor-related social insurance system is radically outdated. Against the background of job
losses and company closures in the weakening Lebanese economy at the end of 2019,
new urgency has emerged to improve the labor market organization as well as social
safety nets and relevant institutions. The framework for the National Social Security
Fund (NSSF) and other retirement benefits date to the 1960s and are inadequate for
managing today’s radically different and rapidly changing role of human capital.
58
executive-magazine.com
Develop
POLICY PRIORITY 17.1
ESTABLISH IMMEDIATE MEASURES FOR LABOR INFLUX
Main Challenges
Proposed Measures
•
Measure 17.1.1
Restructure and strengthen the mandate of the National Employment Office to rapidly
and efficiently collect information from Lebanese residents and Lebanese returning from
abroad, as well as Syrian and Palestinian refugees, and create a file for each applicant.
•
•
•
Take measures to quantify
the labor pool
Provide incentives for
local job creation in the
context of planned publicprivate partnerships and
infrastructure projects with
international financing and
corporate involvement
Design and extend
incentives for job creation
by Lebanese entrepreneurs
returning from abroad
Increase diversity and
productivity of expatriate and
diaspora entrepreneurship
and job creation ventures,
and ease integration of
qualified foreign labor into
Lebanese enterprises
Measure 17.1.2
Qualify and quantify the labor pool as well as its social development levels, and match
it with available demand for labor and with the planned public works projects under
the expected CEDRE frameworks.
Measure 17.1.3
Develop a participatory framework involving ministries for approved employment programs.
Expand the diversity of the qualified labor pool and enhance the development of local
business establishments by revising the regulations for foreign labor participation
in Lebanese enterprises, and provide preferential treatment to entrepreneurs and
qualified returnees with Lebanese roots by approving foreign licenses, degrees, and
other specialist qualifications.
POLICY PRIORITY 17.2
STRENGTHEN WORKERS’ RIGHTS
Main Challenges
Proposed Measures
•
Measure 17.2.1
Draft new bylaws for unions and implement legislation with the aim of promoting a
more constructive and independent role for unions.
•
•
Define the role of labor
unions
Modernize labor laws
Improve work-related
social insurance reach and
coverage
Measure 17.2.2
Develop and fund training and development programs to provide new skills to the
unemployed, and all whose jobs have been made redundant by technological developments.
Measure 17.2.3
Amend the Lebanese labor law to include all foreign workers, unifying the rules for local and
foreign workers, thereby integrating current special rules applied to migrant workers into the labor
law. This will include access to registration and ability to receive compensation from the NSSF.
Measure 17.2.4
Review and, if necessary, revise financial inputs to, and benefits packages
of, work-related social insurance systems.
Measure 17.2.5
Legislate provisions on the rights of workers to continual on the job training and
incentivize employers to provide this.
59
Executive 2019-2020
EXECUTIVE ECONOMIC ROADMAP
Develop
Agenda Priority 18
DEVELOP DIASPORA OUTREACH AND INTERACTION
Each year Lebanon consistently produces more university graduates and workers
than its economy can absorb. Together with cultural and political factors, the
lack of opportunities at home has pushed Lebanese to migrate abroad for over a
century. These outflows and migrations to countries in Europe, Western Asia, the
Americas, Africa, and Oceania have translated into a huge diaspora—Lebanon has
one of the world’s highest ratios of expatriates to residents.
Since the end of the Lebanese civil war in 1990, the attraction and integration of the
diaspora’s human capital financial energies was a—sometimes informal and sometimes
more formal—political paradigm aimed at boosting economic development.
One element the state must work to ameliorate is the current inability of the public
and private sectors to provide adequate job and career opportunities to highly
qualified graduates of tertiary academic institutions. This brain drain has been
a concern over the past 25 years and remains one, as the country is unlikely to
generate enough career options for highly qualified graduates in the foreseeable
future. However, while the state may be unable to completely stop emigration,
it ought to develop the means—through designing policies and engineering
institutional capacities—to make inroads toward helping more Lebanese find jobs
in their homeland. While such efforts would likely be futile as standalone political or
fiscal initiatives, they could generate multiple benefits if done in conjunction with
improvements in Lebanese competitiveness and strengthening heritage preservation
and increasing national identity appreciation (see Agenda Priorities 15 and 19 in this
Economic Roadmap).
Furthermore, one must not overlook the complexities that come with trying to
engage a large diaspora that collectively holds considerable (indeed, potentially
vast but so far unquantified) amounts of financial wealth, human capital, and
entrepreneurial energies. The economic and social impacts, or embedded upside
and downside risks, of the imbalance between the national and expatriate
population groups seem to be not sufficiently understood. Downsides of the
strength of the diaspora, according to research by economists at the World Bank,
are suspected to include factors such as a “remittance curse,” whereby (data
suggests) remittance inflows are not necessarily translated into investments, as
they are predominantly channeled into consumption. Another repercussion of the
Lebanese economy’s dependence on remittances potentially relates to the distortive
impact on the relation of tradable to non-tradable goods and services—such
distortion emerged in 20th century research as the “Dutch disease.”
Policy-makers and influencers must, therefore, focus on developing means to reduce
the brain drain, as well as policies to improve the utilization of remittances and
generally redirect capital inflows from fueling unproductive consumption and asset
inflation toward providing development capital that creates high-skilled jobs. It has
been established in the past 25 years that the financial inflows from and links to the
diaspora have been instrumental to Lebanon’s ability to absorb financial shocks.
Development needs in the efforts to reach out to, and maintain relations with, the
diaspora extend far beyond the issues of financial inflows, remittances, and the
construction of villas in the ancestral villages of diaspora members.
Opportunities in diaspora relations that are worthy of exploration and development
60
executive-magazine.com
Develop
include accessing the human capital pool as well as attracting technology transfers.
Government policies are needed to enhance connections between the diaspora and
the homeland and to capture them in the formal economy. Relying on emotional
appeals of love for the homeland and long-distance patriotism have not been enough
to convince Lebanese diaspora members of the opportunities they could enjoy in
Lebanon. Diaspora outreach and relations, therefore, represent an underutilized
opening to widen the economic reach of Lebanon in ways that could augment
the Lebanese economic sphere beyond its geographical confines and balance the
country’s internal and external political risks.
POLICY PRIORITY 18.1
CAPITALIZE ON DIASPORA RESOURCES
Main Challenges
Proposed Measures
•
Measure 18.1.1
Clearly define “resident” and “expatriate” and create a census of expatriates.
•
•
•
•
Develop a registration
protocol and conduct a census
Incentivize and attract
diaspora tourism
Optimize existing outreach
channels and increase
the strength of diaspora
network
Incentivize the use of
remittances to fund
sustainable investment
projects
Promote opportunities for
diaspora investors to develop
export-oriented ventures in
Lebanon and make efforts
to rebuild trust lost during
the financial crisis in the
second half of 2019
Measure 18.1.2
Mandate the tourism and economy ministries to develop and implement a strategy to
attract diaspora tourism and investment in Lebanon. This should include incentives to
visit Lebanon, as well as incentives to invest.
Measure 18.1.3
Involve Lebanese embassies, and especially the economic attaches appointed by the
Ministry of Foreign Affairs and Emigrants at 20 major embassies, to more actively
disperse information on investment opportunities in Lebanon for diaspora members.
Work to mitigate land price increases that deter diaspora members due to their
negative impact on housing markets.
Measure 18.1.4
Provide fiscal incentives to universities and centers that link expatriates with Lebanon
(e.g., that hire Lebanese expatriates living abroad for short- or long-term contracts
and/or offer courses specifically for members of the diaspora).
Measure 18.1.5
Incentivize the channeling of remittances to investment projects in Lebanon by
providing tax incentives and exemptions for new and sustainable ventures, such
as eco-resorts, and heritage and rural tourism projects, as well as all commercial
establishments with high invested remittance amounts that are compliant with
national priorities set by the Lebanese government.
61
EXECUTIVE ECONOMIC ROADMAP
Executive 2019-2020
Develop
Agenda Priority 18
Measure 18.1.6
Encourage, specifically, diaspora investments into Lebanese startups, through
companies such as Berytech and Beirut Digital District.
Measure 18.1.7
Create a database—including a list of supported target markets and a list of legal
requirements, such as fees and certifications—for all tradable services and goods that
can be exported from Lebanon to regional and international markets.
Measure 18.1.8
Standardize Lebanese products and certification norms in order for goods to readily
comply with standards in target countries.
POLICY PRIORITY 18.2
INSTITUTIONALIZE RELATIONS WITH THE DIASPORA
Main Challenges
Proposed Measures
•
Measure 18.2.1
Build e-government access to enable the diaspora to easily apply for official
documents.
•
•
Empower diaspora access
to e-government services in
Lebanon
Increase support for
Lebanese clubs and boost
capacities
Develop outreach campaigns
Measure 18.2.2
Remove or reduce red tape at Lebanese ministries bearing in mind the needs of
diaspora investors and their desire for transparency, fair pricing, and a reduction of
corruption. Develop and simplify procedures that diaspora investors can follow when
embarking on an investment process in Lebanon. Empower embassies to provide free
and competent legal guidance to potential diaspora investors.
Measure 18.2.3
Build trust among diaspora communities abroad by promoting Lebanon as a safe
place for investment, not only by the implementation of administrative incentives
(see Measure 18.2.2), but also through soft measures, such as outreach campaigns,
sponsorships, and events.
Measure 18.2.4
Enhance ministerial support for Lebanese cultural clubs abroad and promote alliances
and partnerships with foreign universities and think tanks.
62
executive-magazine.com
Develop
Measure 18.2.5
Incentivize syndicates and professional associations in Lebanon to reach out to
diaspora communities when looking for partners, honorary members, or investors.
Promote large investment projects such as job-creating real estate ventures and
sustainable or heritage-enhancing real estate projects, through targeted discounts for
diaspora members.
Measure 18.2.6
Better communicate loans from BDL that are tailored for expatriates (e.g., BDL
Housing Loan under Circular 475, and the BDL loan for expatriate investors that is
capped at $15 million).
Measure 18.2.7
Expand collaboration between Lebanese and diaspora organizations in the economy
and civil society, while ensuring that links are outside the realm of politics and free
from political and sectarian interfernance.
63
EXECUTIVE ECONOMIC ROADMAP
Executive 2019-2020
Develop
Agenda Priority 19
PRESERVATION OF HERITAGE,
CULTURE, AND IDENTITY
Lebanon is globally respected for its cultural history as the homeland of a people
who were among humankind’s innovators in trade, use of money, and expression of
identity through architecture and writing. Cities in the Eastern Mediterranean region
may disagree on which can claim to be the world’s oldest continually inhabited
settlement, but it cannot be denied that urban settlements in this region have
histories and identities that are more than deserving of protection and preservation
for future study and enjoyment. Until today, however, the Lebanese state has not
shown a universal understanding and political will to improve and enforce existing
laws on the protection of antique treasures. Nor has the country shown any signs
of developing and pursuing a national strategy to preserve our natural and built
heritage. In matters of heritage, Lebanon still relies on outdated legislation—Law
166 (1933) issued under the French Mandate. The country’s architectural identity is
being lost as chaotic real estate developments are pursued for profit motives but in
total absence of any vision to preserve heritage clusters and integrate them into a
Master Plan for future development. Our natural heritage, including our coast and
historical landscapes, are being disfigured.
POLICY PRIORITY 19.1
LEGAL REFORM FOR HERITAGE PRESERVATION
Main Challenges
Proposed Measures
•
•
Measure 19.1.1
Issue implementation decrees for Law 37 (2008) on the protection of cultural
property.
Update the legal code
Create a central plan for
preservation
Measure 19.1.2
Pressure Parliament to revise and pass the law on the preservation of heritage sites
and buildings that was approved by the Council of Ministers in October 2017.
Measure 19.1.3
Pressure the Directorate General of Urban Planning to work on a comprehensive
updated Master Plan that preserves what is left of our cultural natural and built
heritage.
Measure 19.1.4
Pressure the Ministry of Culture and the Directorate General of Antiquities to have a
clear stand on the protection of all heritage sites.
64
executive-magazine.com